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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Align Technology Inc | NASDAQ:ALGN | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 282.38 | 262.69 | 282.22 | 10 | 10:14:22 |
ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
|
94-3267295
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification Number)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common Stock, $0.0001 par value
|
|
The NASDAQ Stock Market LLC
(NASDAQ Global Market)
|
|
|
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|
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Page
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Item 1.
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Business
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|
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Executive Officers of the Registrant
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Item 1A.
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Risk Factors
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Item 6.
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Selected Consolidated Financial Data
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 7A.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 8.
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Consolidated Financial Statements and Supplementary Data
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Item 9.
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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Item 9A.
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Controls and Procedures
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Item 9B.
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Other Information
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Item 10.
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Directors, Executive Officers and Corporate Governance
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Item 11.
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Executive Compensation
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Item 12.
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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Item 13.
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Certain Relationships and Related Transactions and Director Independence
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Item 14.
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Principal Accounting Fees and Services
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Item 15.
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Exhibits, Financial Statement Schedules
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Item 16.
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Form 10-K Summary
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|
Signatures
|
1.
|
International Expansion.
In order to provide the millions of consumers access to a better smile, we continue increasing our presence globally by making our products available in more countries. We expect to continue to grow and expand our business by investing in resources, infrastructure, and initiatives that will drive Invisalign treatment growth in our current and new international markets. As our core countries within the EMEA and APAC regions continue to grow in both number of new Invisalign trained doctors and customer utilization, we strive to make sure we can support that growth through investments such as headcount, clinical support, education and advertising. We have transitioned most of our smaller country markets from an indirect to a direct sales model, and, while we do not expect a material impact from these countries for some time, in the near term we will leverage our existing infrastructure in adjacent country markets as we build local sales organizations to drive long-term market penetration. In addition, we are scaling and expanding our operations and facilities to better support our customers across the globe. In 2018, we opened new treatment planning facilities in Madrid, Spain to support our customers within this region and we expanded our facilities in Costa Rica to support our growth.
|
2.
|
Orthodontist Utilization.
We continue to innovate and increase the product applicability and predictability to address a wide range of cases, from simple to complex, thereby enabling doctors to confidently treat teenagers and adults with the Invisalign System. Over the last several years, we launched clinical innovations such as Invisalign G6 and Invisalign G7. In March 2017, we launched Invisalign Comprehensive with Mandibular Advancement, the first clear aligner solution for Class II correction in growing tween and teen patients in Canada and certain country markets in EMEA and APAC. This offering combines the benefits of our clear aligner system with features for moving the lower jaw forward while simultaneously aligning the teeth. Approximately 30% to 45% of teen cases need Class II correction. In October 2018 we received 510(k) approval for Invisalign with Mandibular Advancement in the U.S. and began its commercial launch in November 2018. We also continue to make improvements to our Invisalign treatment software, ClinCheck Pro, designed to deliver an exceptional user experience and increase treatment control to help our doctors achieve their treatment goals.
|
3.
|
GP Dentist Treat & Refer.
We want to enable GPs, who have access to a large patient base, to more easily identify Invisalign cases they can treat, monitor patient progress or, if needed, help refer cases to an orthodontist while providing high-quality restorative, orthodontic, and dental hygiene care. In 2018, we continued to commercialize Invisalign Go, a simplified and streamlined solution designed for GPs and trained over 3,000 new iGo doctors primarily in EMEA. In the EMEA region, we segmented sales and marketing for certain country markets into two separate organizations to serve each customer segment, orthodontists and GP dentists separately, thereby increasing our focus and effectiveness on GP dentists. In the first quarter of 2019, we plan to add 50 new sales representatives in EMEA to cover the GP dentist channel. The iTero scanner is an important component to that customer experience and is central to a digital approach as well as overall customer utilization of Invisalign treatment. The iTero scanner is optimized for Invisalign treatment with the Invisalign Outcome Simulator and Progress Assessment tool. In June 2017, we launched TimeLapse technology that allows doctors or practitioners to compare a patient’s 3D historic scans to the present-day scan, enabling clinicians to identify and measure orthodontic movement, tooth wear, and gingival recession. This highlights areas of diagnostic interest to dental professionals and helps foster a proactive conversation with the patient regarding potential restorative or orthodontic solutions. In 2018, we announced multi-year agreements with Heartland Dental and Aspen Dental, two large dental support organizations, to extend iTero Element intraoral scanners to their supported dentists and teams nationwide.
|
4.
|
Patient Demand & Conversion.
Our goal is to make Invisalign a highly recognized name brand worldwide by creating awareness for Invisalign treatment among consumers and motivating potential patients to seek Invisalign treatment. We accomplish this objective through an integrated consumer marketing strategy that includes television, media, social networking and event marketing as well as educating patients on treatment options and directing them to high volume Invisalign doctors. In January 2017, we launched a new Smile Concierge program with the objective to help more U.S. consumers start Invisalign treatment and improve their overall experience by shortening their research cycles and utilizing consumer insights to help our doctors better engage with consumers. Our Smile Concierge program educates consumers on the benefits of Invisalign treatment, answers their questions, and helps them schedule an appointment with an Invisalign doctor. In addition, the Invisalign Experience program reflects the Company’s overarching approach to engaging consumers through brand experiences in consumer-based settings and environments. Through the Invisalign Experience program we’re learning more than ever about reducing barriers to treatment for potential patients so that they are excited about getting a better smile with an Invisalign doctor. In 2018, we expanded the interactive brand experience that was piloted in 2017 and finished the year with twelve Invisalign Experience locations in major U.S. cities. The program expansion is designed to address the rapidly evolving consumer market for clear aligners and connects consumers interested in Invisalign treatment with Invisalign doctors in their communities. We also partnered with a few Invisalign doctors in select U.S. cities piloting doctor-owned Invisalign Experience centers to test new ways to reach consumers and connect them directly with doctors to start Invisalign treatment. This pilot is intended to help doctors integrate consumer-friendly design and consultation workflow into their practices and test the new Invisalign Experience branding and a consumer-focused approach to consultations and Invisalign treatment starts. It includes an initial digital scan and smile visualization with a scanner and immediate appointments for walk-ins. In addition to providing potential leads to participating Invisalign practices, we are seeing a positive halo effect and increased growth rates for all of the Invisalign practices in the surrounding area whether they participate in the location network or not. While we are still early in the development of our Invisalign Experience locations and the overarching Invisalign Experience program, we believe it will have a positive impact on demand creation for Invisalign practices by engaging directly with consumers (Refer to
Note 8 "Legal Proceedings" of the Notes to Consolidated Financial Statements
for a communication received from SDC on the Invisalign Experience program).
|
•
|
effectiveness of treatment;
|
•
|
price;
|
•
|
software features;
|
•
|
aesthetic appeal of the treatment method;
|
•
|
customer support;
|
•
|
customer online interface;
|
•
|
brand awareness;
|
•
|
innovation;
|
•
|
distribution network;
|
•
|
comfort associated with the treatment method;
|
•
|
oral hygiene;
|
•
|
ease of use; and
|
•
|
dental professionals’ chair time.
|
Name
|
Age
|
Position
|
Joseph M. Hogan
|
61
|
President and Chief Executive Officer
|
John F. Morici
|
52
|
Chief Financial Officer and Senior Vice President, Global Finance
|
Simon Beard
|
52
|
Senior Vice President and Managing Director, EMEA
|
Roger E. George
|
53
|
Senior Vice President, Chief Legal and Regulatory Officer
|
Stuart Hockridge
|
47
|
Senior Vice President, Global Human Resources
|
Sreelakshmi Kolli
|
44
|
Senior Vice President, Global Information Technology
|
Jennifer Olson
|
41
|
Senior Vice President and Managing Director, Doctor-Directed Consumer Channel
|
Raphael S. Pascaud
|
47
|
Senior Vice President, Business Development and Strategy
|
Raj Pudipeddi
|
46
|
Senior Vice President and Chief Marketing Officer
|
Zelko Relic
|
54
|
Chief Technology Officer and Senior Vice President, Global Research & Development
|
Yuval Shaked
|
45
|
Senior Vice President and Managing Director, iTero Scanner and Services Business
|
Julie Tay
|
52
|
Senior Vice President and Managing Director, Asia Pacific
|
Emory M. Wright
|
49
|
Senior Vice President, Global Operations
|
•
|
difficulties in hiring and retaining employees generally, as well as difficulties in hiring and retaining employees with the necessary skills to perform the more technical aspects of our operations;
|
•
|
difficulties in managing international operations, including any travel restrictions to or from our facilities;
|
•
|
fluctuations in currency exchange rates;
|
•
|
import and export controls, license requirements and restrictions;
|
•
|
controlling production volume and quality of the manufacturing process;
|
•
|
political, social and economic instability, including increased levels of violence in Juarez, Mexico or the Middle East. We cannot predict the effect on us of any future armed conflict, political instability or violence in these regions. In addition, some of our employees in Israel are obligated to perform annual reserve duty in the Israeli military and are subject to being called for additional active duty under emergency circumstances. We cannot predict the full impact of these conditions on us in the future, particularly if emergency circumstances or an escalation in the political situation occurs. If many of our employees are called for active duty, our operations in Israel and our business may not be able to function at full capacity;
|
•
|
acts of terrorism and acts of war;
|
•
|
general geopolitical instability and the responses to it, such as the possibility of additional sanctions against China and Russia which continue to bring uncertainty to these regions;
|
•
|
interruptions and limitations in telecommunication services;
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•
|
product or material transportation delays or disruption, including as a result of customs clearance, increased levels of violence, acts of terrorism, acts of war or health epidemics restricting travel to and from our international locations or as a result of natural disasters, such as earthquakes or volcanic eruptions;
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•
|
burdens of complying with a wide variety of local country and regional laws, including the risks associated with the Foreign Corrupt Practices Act and local anti-bribery compliance;
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•
|
trade restrictions and changes in tariffs, including the recent tariffs imposed by the U.S. and China and the possibility of additional tariffs or other trade restrictions related to trade between the two countries; and
|
•
|
potential adverse tax consequences.
|
•
|
local political and economic instability;
|
•
|
the engagement of activities by our employees, contractors, partners and agents, especially in countries with developing economies, that are prohibited by international and local trade and labor laws and other laws prohibiting corrupt payments to government officials, including the Foreign Corrupt Practices Act, the United Kingdom (“UK”) Bribery Act of 2010 and export control laws, in spite of our policies and procedures designed to ensure compliance with these laws;
|
•
|
fluctuations in currency exchange rates; and
|
•
|
increased expense of developing, testing and making localized versions of our products.
|
•
|
correctly identify customer needs and preferences and predict future needs and preferences;
|
•
|
include functionality and features that address customer requirements;
|
•
|
ensure compatibility of our computer operating systems and hardware configurations with those of our customers;
|
•
|
allocate our research and development funding to products with higher growth prospects;
|
•
|
anticipate and respond to our competitors’ development of new products. product offerings and technological innovations;
|
•
|
differentiate our products and product offerings from our competitors;
|
•
|
innovate and develop new technologies and applications;
|
•
|
the availability of third-party reimbursement of procedures using our products;
|
•
|
obtain adequate intellectual property rights; and
|
•
|
encourage customers to adopt new technologies.
|
•
|
limited visibility into and difficulty predicting from quarter to quarter, the level of activity in our customers’ practices including limited visibility into the number of aligners purchased by SmileDirectClub, LLC (“SDC”) under the supply agreement;
|
•
|
weakness in consumer spending as a result of a slowdown in the global, U.S. or other economies;
|
•
|
changes in product mix;
|
•
|
higher manufacturing costs driven by an increase in the numbers of aligners per case;
|
•
|
changes in relationships with our dental support organizations, including timing of orders;
|
•
|
changes in the timing of receipt of Invisalign case product orders during a given quarter which, given our cycle time and the delay between case receipts and case shipments, could have an impact on which quarter revenues can be recognized;
|
•
|
fluctuations in currency exchange rates against the U.S. dollar;
|
•
|
our inability to scale production of our iTero Element scanner to meet customer demand;
|
•
|
if participation in our customer rebate or discount programs increases, our average selling price will be adversely affected;
|
•
|
seasonal fluctuations in the number of doctors in their offices and their availability to take appointments;
|
•
|
success of or changes to our marketing programs from quarter to quarter;
|
•
|
our reliance on our contract manufacturers for the production of sub-assemblies for our intraoral scanners;
|
•
|
timing of industry tradeshows;
|
•
|
changes in the timing of when revenues are recognized, including as a result of the introduction of new products, product offerings or promotions, modifications to our terms and conditions or as a result of changes to critical accounting estimates or new accounting pronouncements;
|
•
|
changes to our effective tax rate;
|
•
|
unanticipated delays in production caused by insufficient capacity or availability of raw materials;
|
•
|
any disruptions in the manufacturing process, including unexpected turnover in the labor force or the introduction of new production processes, power outages or natural or other disasters beyond our control;
|
•
|
underutilization of manufacturing and treat facilities;
|
•
|
the development and marketing of directly competitive products by existing and new competitors;
|
•
|
changes in relationships with our distributors;
|
•
|
impairments in the value of our investments in SDC and other privately held companies could be material;
|
•
|
major changes in available technology or the preferences of customers may cause our current product offerings to become less competitive or obsolete;
|
•
|
aggressive price competition from competitors;
|
•
|
costs and expenditures in connection with litigation;
|
•
|
costs and expenditures in connection with establishment of treatment planning and Aligner fabrication in international locations;
|
•
|
costs and expenditures in connection with hiring and deployment of direct sales force personnel;
|
•
|
the timing of new product introductions by us and our competitors, as well as customer order deferrals in anticipation of enhancements or new products;
|
•
|
unanticipated delays in our receipt of patient records made through an intraoral scanner for any reason;
|
•
|
disruptions to our business due to political, economic or other social instability, including the impact of an epidemic any of which results in changes in consumer spending habits, consumers unable or unwilling to visit the orthodontist or general practitioners office, as well as any impact on workforce absenteeism;
|
•
|
inaccurate forecasting of net revenues, production and other operating costs,
|
•
|
investments in research and development to develop new products and enhancements;
|
•
|
disruptions to our business as a result of our agreement to manufacture clear aligners for SDC, including market acceptance of the SDC business model and product, possible adverse customer reaction and negative publicity about us and our products;
|
•
|
changes in accounting standards, policies and estimates including changes made by our equity investee; and
|
•
|
our ability to successfully hedge against a portion of our foreign currency-denominated assets and liabilities.
|
•
|
product design, development, manufacturing and testing;
|
•
|
product labeling;
|
•
|
product storage;
|
•
|
pre-market clearance or approval;
|
•
|
complaint handling and corrective actions;
|
•
|
advertising and promotion; and
|
•
|
product sales and distribution.
|
•
|
warning letters, fines, injunctions, consent decrees and civil penalties;
|
•
|
repair, replacement, refunds, recall or seizure of our products;
|
•
|
operating restrictions or partial suspension or total shutdown of production;
|
•
|
refusing our requests for 510(k) clearance or pre-market approval of new products, new intended uses, or modifications to existing products;
|
•
|
withdrawing clearance or pre-market approvals that have already been granted; and
|
•
|
criminal prosecution.
|
•
|
storage, transmission and disclosure of medical information and healthcare records;
|
•
|
prohibitions against the offer, payment or receipt of remuneration to induce referrals to entities providing healthcare services or goods or to induce the order, purchase or recommendation of our products; and
|
•
|
the marketing and advertising of our products.
|
•
|
quarterly variations in our results of operations and liquidity;
|
•
|
changes in recommendations by the investment community or in their estimates of our net revenues or operating results;
|
•
|
speculation in the press or investment community concerning our business and results of operations;
|
•
|
strategic actions by our competitors, such as product announcements or acquisitions;
|
•
|
announcements of technological innovations or new products or product offerings by us, our customers or competitors;
|
•
|
key decisions in pending litigation; and
|
•
|
general economic market conditions.
|
Location
|
Lease/Own
|
Primary Use
|
Expiration of Lease
|
San Jose, California
|
Own
|
Office for corporate headquarters, research & development and administrative personnel
|
N/A
|
Juarez, Mexico
|
Own
|
Manufacturing and office for administrative personnel
|
N/A
|
San Jose, Costa Rica
|
Own
|
Office for administrative personnel, treatment personnel, and customer care
|
N/A
|
Or Yehuda, Israel
|
Lease
|
Manufacturing and office for research & development and administrative personnel
|
February 2022
|
Amsterdam, The Netherlands
|
Lease
|
Office for European headquarters, sales and marketing and administrative personnel
|
March 2020
|
Moscow, Russia
|
Lease
|
Office for research & development
|
March 2024
|
Raleigh, North Carolina
|
Lease
|
Office for research & development and administrative personnel
|
March 2026
|
Ziyang, China
|
Lease
|
Manufacturing and office for administrative personnel
|
May 2021
|
Period
|
|
Total Number of Shares Repurchased
|
|
Average Price Paid per Share
|
|
Total Number of Shares Repurchased as Part of Publicly Announced Program
|
|
Approximate Dollar Value of Shares that May Yet Be Repurchased Under the Program
(1)
|
||||||
October 1, 2018 through October 31, 2018
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
550,000,000
|
|
November 1, 2018 through November 30, 2018
|
|
142,677
|
|
|
$
|
245.31
|
|
|
142,677
|
|
|
$
|
500,000,000
|
|
December 1, 2018 through December 31, 2018
|
|
91,865
|
|
|
$
|
163.28
|
|
|
91,865
|
|
|
$
|
500,000,000
|
|
◦
|
May 2018 Repurchase Program.
In May 2018, we announced that our Board of Directors had authorized a plan to repurchase up to $600.0 million of our common stock. In August 2018, we repurchased $50.0 million of our common stock on the open market. In November 2018, we entered into an accelerated share repurchase ("2018 ASR") to repurchase $50.0 million of our common stock which was completed in December 2018.
As of
December 31, 2018
, we have $500.0 million remaining under the May 2018 Repurchase Program (
Refer to Note 11 "Common Stock Repurchase Programs" of the Notes to Consolidated Financial Statements
for details on common stock repurchase programs).
|
|
Year Ended December 31,
|
||||||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
||||||||||
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
$
|
1,966,492
|
|
|
$
|
1,473,413
|
|
|
$
|
1,079,874
|
|
|
$
|
845,486
|
|
|
$
|
761,653
|
|
Gross profit
|
$
|
1,447,867
|
|
|
$
|
1,116,947
|
|
|
$
|
815,294
|
|
|
$
|
640,110
|
|
|
$
|
578,443
|
|
Income from operations
|
466,564
|
|
|
353,611
|
|
|
248,921
|
|
|
188,634
|
|
|
193,576
|
|
|||||
Interest income
|
8,576
|
|
|
6,948
|
|
|
4,213
|
|
|
2,938
|
|
|
1,818
|
|
|||||
Other income (expense), net
|
(8,489
|
)
|
|
4,240
|
|
|
(10,568
|
)
|
|
(5,471
|
)
|
|
(5,025
|
)
|
|||||
Net income before provision for income taxes and equity in losses of investee
|
466,651
|
|
|
364,799
|
|
|
242,566
|
|
|
186,101
|
|
|
190,369
|
|
|||||
Provision for income taxes
|
57,723
|
|
|
130,162
|
|
|
51,200
|
|
|
42,081
|
|
|
44,537
|
|
|||||
Equity in losses of investee, net of tax
|
8,693
|
|
|
3,219
|
|
|
1,684
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
$
|
400,235
|
|
|
$
|
231,418
|
|
|
$
|
189,682
|
|
|
$
|
144,020
|
|
|
$
|
145,832
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
$
|
5.00
|
|
|
$
|
2.89
|
|
|
$
|
2.38
|
|
|
$
|
1.80
|
|
|
$
|
1.81
|
|
Diluted
|
$
|
4.92
|
|
|
$
|
2.83
|
|
|
$
|
2.33
|
|
|
$
|
1.77
|
|
|
$
|
1.77
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
80,064
|
|
|
80,085
|
|
|
79,856
|
|
|
79,998
|
|
|
80,754
|
|
|||||
Diluted
|
81,357
|
|
|
81,832
|
|
|
81,484
|
|
|
81,521
|
|
|
82,283
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
|
December 31,
|
||||||||||||||||||
|
2018
|
|
2017
(2)
|
|
2016
(2)
|
|
2015
|
|
2014
|
||||||||||
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital
(1)
|
$
|
610,406
|
|
|
$
|
658,316
|
|
|
$
|
597,772
|
|
|
$
|
460,338
|
|
|
$
|
455,349
|
|
Total assets
|
2,052,458
|
|
|
1,784,009
|
|
|
1,402,305
|
|
|
1,158,633
|
|
|
987,997
|
|
|||||
Total long-term liabilities
|
107,494
|
|
|
129,670
|
|
|
46,427
|
|
|
39,035
|
|
|
33,415
|
|
|||||
Stockholders’ equity
|
$
|
1,252,891
|
|
|
$
|
1,154,288
|
|
|
$
|
999,307
|
|
|
$
|
847,926
|
|
|
$
|
752,771
|
|
(1)
|
Working capital is calculated as the difference between total current assets and total current liabilities.
|
(2)
|
Balances have been recast to reflect the adoption of new revenue accounting standard (
Refer to Note 1 "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements
for details).
|
•
|
New Invisalign Product Portfolio and Pricing
. In July 2018, we launched a new expanded Invisalign product portfolio which includes new options and greater flexibility to treat a broader range of patients. The new Invisalign product portfolio offers doctors more choices by extending desirable features across the entire portfolio and creating new Invisalign treatment packages, as well as new options to treat young patients with early mixed dentition (with a mixture of primary/baby and permanent teeth). The new end-to-end Invisalign product portfolio includes clear aligner product offerings for almost every patient age group and case complexity to make it easier for our doctors to tailor treatment planning to the needs of each patient. Pricing and availability for the new Invisalign product offerings and the associated terms and conditions vary by region.
|
•
|
New Invisalign Products and Feature Enhancements
. Product innovation drives greater treatment predictability, clinical applicability and ease of use for our customers which supports adoption of Invisalign treatment in their practices. Our focus is to develop solutions and features to treat a wide range of cases from simple to complex.
|
◦
|
In March 2017, we announced Invisalign treatment with Mandibular Advancement, the first clear aligner solution for Class II correction in growing tween and teen patients. This offering combines the benefits of our clear aligner system with features for moving the lower jaw forward while simultaneously aligning the teeth. Invisalign treatment with Mandibular Advancement is available in Canada, select Europe, Middle East and Africa (“EMEA”), Asia Pacific (“APAC”) and Latin America (“LATAM”) countries and, in the U.S. starting November 2018 as we received 510(k) clearance from the United States (“U.S.”) Food and Drug Administration in October 2018.
|
◦
|
Beginning July 2018, Invisalign First clear aligners, a treatment option designed with features specifically for younger patients with early mixed dentition, are available to Invisalign-trained doctors in the U.S., Canada, Australia, New Zealand, Japan, and the EMEA region. Invisalign First clear aligners are designed specifically to address a broad range of younger patients’ malocclusions, including shorter clinical crowns, management of erupting dentition and predictable dental arch expansion. Phase 1 treatment is an early interceptive orthodontic treatment for young patients, traditionally done through arch expanders, or partial metal braces, before all permanent teeth have erupted, typically at ages seven through ten years.
|
◦
|
In April 2018, we announced a new Invisalign Go product with more user-friendly iTero digital chairside experience and greater flexibility to treat a wider range of mild to moderate cases, such as crowded or gap teeth that require teeth straightening prior to restorative treatments. Invisalign Go is available to Invisalign-trained doctors in the U.S., the majority of European countries as well as in select APAC markets. Invisalign Go also incorporates new data-driven clinical protocols for predictable tooth movement and automated case assessments that leverages our Invisalign patients treated to date. These improvements make it easier for general practitioner dentists to tailor their treatment plans to the individual needs of each patient.
|
•
|
New iTero Products and Technology Innovation.
The iTero scanner is an important component to our customer experience and is central to a digital approach as well as overall customer utilization of Invisalign.
|
◦
|
In April 2018, we expanded the iTero Element portfolio with the launch of the iTero Element 2 and the iTero Element Flex scanners, building on the existing high precision, full-color imaging and fast scan times of the
|
◦
|
In April 2018, we announced that we received market approval for the iTero Element intra-oral scanner from the China Food and Drug Administration, and we began offering this scanner in China. The iTero Element scanner launch in China not only supports growth of our base Invisalign clear aligner business but also represents a major milestone for digital dentistry in China. As we continue to expand into markets where we sell our intra-oral scanners, we expect continued growth for the foreseeable future due to the size of the market opportunities and our relatively low market penetration in these regions.
|
•
|
Invisalign Adoption.
Our goal is to establish Invisalign as the treatment of choice for treating malocclusion ultimately driving increased product adoption and frequency of use by dental professionals, also known as "utilization rates." Our annual utilization rates for the last three fiscal years are as follows:
|
◦
|
Total utilization in 2018 increased to 15.7 cases per doctor compared to 14.5 cases in 2017.
|
▪
|
North America:
Utilization among our North American orthodontist customers increased in 2018 to 56.7 cases per doctor compared to 46.6 cases per doctor in 2017. The increase in North American
|
▪
|
International:
International doctor utilization was 13.9 cases per doctor in 2018 compared to 13.2 cases in 2017. The increase in International utilization reflects increased utilization and continued expansion of our customer base in both EMEA and APAC regions due to increasing adoption of the product due in part to its ability to treat more complex cases.
|
•
|
Number of New Invisalign Doctors Trained.
We continue to expand our Invisalign customer base through the training of new doctors. In 2018, we trained approximately 19,655 new Invisalign doctors of which 7,885 were trained in the Americas region and 11,770 in the International region.
|
•
|
International Invisalign Growth.
We continue to focus our efforts towards increasing Invisalign clear aligner adoption by dental professionals in the EMEA and APAC markets. On a year-over-year basis, our international Invisalign volume increased 45.3% driven primarily by increased adoption as well as expansion of our customer base in both the EMEA and APAC regions. We continue to see growth from our international orthodontists and general practitioner (“GP”) customers and are seeing more positive traction in the GP channel from segmenting our sales and marketing resources and programs specifically around each customer channel. In addition, we believe that continuous product introductions and feature improvements, such as Invisalign treatment with mandibular advancement, provide our customers with continued confidence in treating complex cases as well as teen-aged patients with Invisalign clear aligners. In 2019, we are continuing to expand in our existing markets through targeted investments in sales coverage and professional marketing and education programs, along with consumer marketing in select country markets. We expect International revenues to continue to grow at a faster rate than the Americas for the foreseeable future due to our continued investment in international market expansion, the size of the market opportunities, and our relatively low market penetration of these regions. Our future growth is dependent upon the continued growth of Invisalign adoption and international market penetration (Refer to
Item 1A Risk Factors - “We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.”
for information on related risk factors).
|
•
|
Establish Regional Order Acquisition, Treatment Planning and Manufacturing Operations.
We will continue to establish and expand additional order acquisition, treatment planning and manufacturing operations closer to our international customers in order to improve our operational efficiency and to provide doctors confidence in using Invisalign clear aligners to treat more patients and more often. In the fourth quarter of 2018, we began fabricating our aligners in our new manufacturing facility in Ziyang, China, our first aligner fabrication facility outside of Juarez, Mexico. We expect that it will take several quarters to ramp this facility up to full capacity and as a result manufacturing labor and overhead in this facility will be underutilized during this transition period. (Refer
to
Item 1A Risk Factors - “As we continue to grow, we are subject to growth related risks, including risks related to excess or constrained capacity at our existing facilities.”
for information on related risk factors).
|
•
|
Invisalign Experience Program.
In 2018, we expanded the interactive brand experience that was piloted in 2017 and finished the year with a total of twelve Invisalign locations in major U.S. cities. The program expansion is designed to address the rapidly-evolving consumer market for clear aligners and connects consumers interested in Invisalign treatment with Invisalign doctors in their communities (Refer to
Item 3 "Legal Proceedings" for details on SDC dispute which may impact the Invisalign locations).
|
•
|
Increased Sales Force.
In order to provide more comprehensive sales and service coverage, in the fourth quarter of 2018, we increased our sales force in the Americas by adding approximately 100 sales team members. In the first quarter of 2019, we plan to add 50 new sales representatives in EMEA to cover GP dentist channel. (Refer to
Item 1A Risk Factors - “We primarily rely on our direct sales force to sell our products, and any failure to maintain our direct sales force could harm our business"
for information on related risk factors).
|
•
|
Expenses.
We expect expenses to increase in 2019 due in part to:
|
◦
|
Investments in manufacturing capacity and facilities to enhance our regional capabilities;
|
◦
|
Investments in international expansion in new country markets;
|
◦
|
Investments in expansion of number of direct sales force personnel;
|
◦
|
Increases in sales, marketing and customer support resources;
|
◦
|
Product and technology innovation to enhance product efficiency and operational productivity;
|
◦
|
Increases in legal expenses, primarily related to the continued protection of our intellectual property rights including our patents along with the additional costs related to the planned corporate structure reorganization.
|
•
|
Stock Repurchases:
|
◦
|
April 2016 Repurchase Program.
In 2018, we repurchased approximately $200.0 million of our common stock on the open market, completing the April 2016 Repurchase Program.
|
◦
|
May 2018 Repurchase Program.
In May 2018, we announced that our Board of Directors had authorized a plan to repurchase up to $600.0 million of our common stock. In August 2018, we repurchased $50.0 million of our common stock on the open market. In November 2018, we entered into an accelerated share repurchase ("2018 ASR") to repurchase $50.0 million of our common stock which was completed in December 2018. As of
December 31, 2018
, we have $500.0 million remaining under the May 2018 Repurchase Program. In February 2019, we repurchased $50.0 million of our common stock on the open market (
Refer to Note 11 "Common Stock Repurchase Programs" of the Notes to Consolidated Financial Statements
for details on common stock repurchase programs).
|
•
|
SmileDirectClub.
In February 2018, we received a communication on behalf of SDC Financial LLC, SmileDirectClub LLC, and the Members of SDC Financial LLC other than the Company (collectively, the SDC Entities) alleging that the launch and operation of the Invisalign locations pilot program constitutes a breach of non-compete provisions applicable to the members of SDC Financial LLC, including Align. As a result of this alleged breach, SDC Financial LLC notified us that its members (other than Align) seek to exercise a right to repurchase all of Align's SDC Financial LLC membership interests for a purchase price equal to the current capital account balance. The SDC Entities’ communication also alleged that we breached confidentiality provisions applicable to the SDC Financial LLC members and demanded that we cease all activities related to the Invisalign pilot project, close existing Invisalign locations and cease using SDC’s confidential information. In April 2018, the SDC Entities served a Demand for Arbitration alleging that we breached the non-compete clause and confidentiality clause, misused the SDC Entities’ alleged trade secrets, and violated fiduciary duties to SDC Financial LLC. The SDC Entities seek through the arbitration the rights to repurchase all of Align’s SDC Financial LLC membership interests for a purchase price equal to the current capital account balance as defined by the Internal Revenue Service which likely is significantly below the current fair market value of such investment, an injunction requiring us to close our Invisalign locations and to cease using the SDC Entities’ confidential information, and financial damages in an unspecified amount. We filed a response in which we denied the SDC Entities’ allegations and denied that the SDC Entities are entitled to any relief. In April 2018 the SDC Entities also filed a motion for preliminary injunction in the Tennessee Court of Chancery seeking to enjoin Align from opening additional Invisalign locations until the arbitration is completed. In June 2018, the Tennessee court denied the SDC Entities’ motion for a preliminary injunction. In December 2018, the parties participated in binding arbitration proceedings and presented closing arguments on January 23, 2019. The arbitrator’s decision is due on or before March 4, 2019. This dispute does not impact Align’s existing supply agreement with SDC which remains in place through 2019. We do not intend to renew this agreement. We are currently unable to predict the outcome of this dispute and therefore cannot determine the likelihood of loss, if any, nor estimate a range of possible loss. (
Refer to Note 8 "Legal Proceedings" of the Notes to Consolidated Financial Statements
for details on SDC dispute).
|
•
|
Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below:
|
◦
|
Comprehensive Products include, but not limited to, Invisalign Comprehensive (formerly known as Invisalign Full and Invisalign Teen), Invisalign Assist and Invisalign First.
|
◦
|
Non-Comprehensive Products include, but not limited to, Invisalign Express 10, Invisalign Express 5, Express Package, Lite Package and Invisalign Go in addition to revenues from the sale of aligners to SmileDirectClub (“SDC”) under our supply agreement.
|
◦
|
Non-Case includes, but not limited to, Vivera retainers along with our training and ancillary products for treating malocclusion.
|
•
|
Our Scanner segment consists of intraoral scanning systems, additional services and ancillary products available with the intraoral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.
|
|
Year Ended
|
|
|
|
|
|
Year Ended
|
|
|
|
|
||||||||||||||||||
Net Revenues
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||||||||
Clear Aligner revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Americas
|
$
|
903.3
|
|
|
$
|
754.1
|
|
|
$
|
149.2
|
|
|
19.8
|
%
|
|
$
|
754.1
|
|
|
$
|
571.6
|
|
|
$
|
182.5
|
|
|
31.9
|
%
|
International
|
684.2
|
|
|
473.5
|
|
|
210.7
|
|
|
44.5
|
%
|
|
473.5
|
|
|
323.7
|
|
|
149.8
|
|
|
46.3
|
%
|
||||||
Non-Case
|
104.0
|
|
|
81.7
|
|
|
22.3
|
|
|
27.3
|
%
|
|
81.7
|
|
|
63.0
|
|
|
18.7
|
|
|
29.7
|
%
|
||||||
Total Clear Aligner net revenues
|
$
|
1,691.5
|
|
|
$
|
1,309.3
|
|
|
$
|
382.2
|
|
|
29.2
|
%
|
|
$
|
1,309.3
|
|
|
$
|
958.3
|
|
|
$
|
351.0
|
|
|
36.6
|
%
|
Scanner net revenues
|
275.0
|
|
|
164.1
|
|
|
110.9
|
|
|
67.6
|
%
|
|
164.1
|
|
|
121.5
|
|
|
42.6
|
|
|
35.1
|
%
|
||||||
Total net revenues
|
$
|
1,966.5
|
|
|
$
|
1,473.4
|
|
|
$
|
493.1
|
|
|
33.5
|
%
|
|
$
|
1,473.4
|
|
|
$
|
1,079.8
|
|
|
$
|
393.6
|
|
|
36.5
|
%
|
|
Year Ended
|
|
|
|
|
|
Year Ended
|
|
|
|
|
||||||||||||
Region
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Americas
|
780.7
|
|
|
631.6
|
|
|
149.1
|
|
|
23.6
|
%
|
|
631.6
|
|
|
469.4
|
|
|
162.2
|
|
|
34.6
|
%
|
International
|
499.9
|
|
|
344.8
|
|
|
155.1
|
|
|
45.0
|
%
|
|
344.8
|
|
|
239.8
|
|
|
105.0
|
|
|
43.8
|
%
|
Total case volume
|
1,280.6
|
|
|
976.4
|
|
|
304.2
|
|
|
31.2
|
%
|
|
976.4
|
|
|
709.2
|
|
|
267.2
|
|
|
37.7
|
%
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Clear Aligner
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of net revenues
|
$
|
411.0
|
|
|
$
|
289.7
|
|
|
$
|
121.3
|
|
|
$
|
289.7
|
|
|
$
|
210.8
|
|
|
$
|
78.9
|
|
% of net segment revenues
|
24.3
|
%
|
|
22.1
|
%
|
|
|
|
22.1
|
%
|
|
22.0
|
%
|
|
|
|
|||||||
Gross profit
|
$
|
1,280.5
|
|
|
$
|
1,019.6
|
|
|
$
|
260.9
|
|
|
$
|
1,019.6
|
|
|
$
|
747.5
|
|
|
$
|
272.1
|
|
Gross margin %
|
75.7
|
%
|
|
77.9
|
%
|
|
|
|
77.9
|
%
|
|
78.0
|
%
|
|
|
||||||||
Scanner
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of net revenues
|
$
|
107.7
|
|
|
$
|
66.8
|
|
|
$
|
40.9
|
|
|
$
|
66.8
|
|
|
$
|
53.7
|
|
|
$
|
13.1
|
|
% of net segment revenues
|
39.1
|
%
|
|
40.7
|
%
|
|
|
|
40.7
|
%
|
|
44.2
|
%
|
|
|
|
|||||||
Gross profit
|
$
|
167.4
|
|
|
$
|
97.4
|
|
|
$
|
70.0
|
|
|
$
|
97.4
|
|
|
$
|
67.8
|
|
|
$
|
29.6
|
|
Gross margin %
|
60.9
|
%
|
|
59.3
|
%
|
|
|
|
59.3
|
%
|
|
55.8
|
%
|
|
|
||||||||
Total cost of net revenues
|
$
|
518.6
|
|
|
$
|
356.5
|
|
|
$
|
162.1
|
|
|
$
|
356.5
|
|
|
$
|
264.6
|
|
|
$
|
91.9
|
|
% of net revenues
|
26.4
|
%
|
|
24.2
|
%
|
|
|
|
24.2
|
%
|
|
24.5
|
%
|
|
|
||||||||
Gross profit
|
$
|
1,447.9
|
|
|
$
|
1,116.9
|
|
|
$
|
331.0
|
|
|
$
|
1,116.9
|
|
|
$
|
815.3
|
|
|
$
|
301.6
|
|
Gross margin %
|
73.6
|
%
|
|
75.8
|
%
|
|
|
|
75.8
|
%
|
|
75.5
|
%
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Selling, general and administrative
|
$
|
852.4
|
|
|
$
|
665.8
|
|
|
$
|
186.6
|
|
|
$
|
665.8
|
|
|
$
|
490.7
|
|
|
$
|
175.1
|
|
% of net revenues
|
43.3
|
%
|
|
45.2
|
%
|
|
|
|
45.2
|
%
|
|
45.4
|
%
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Research and development
|
$
|
128.9
|
|
|
$
|
97.6
|
|
|
$
|
31.3
|
|
|
$
|
97.6
|
|
|
$
|
75.7
|
|
|
$
|
21.9
|
|
% of net revenues
|
6.6
|
%
|
|
6.6
|
%
|
|
|
|
6.6
|
%
|
|
7.0
|
%
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Clear Aligner
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from operations
|
$
|
712.4
|
|
|
$
|
564.6
|
|
|
$
|
147.8
|
|
|
$
|
564.6
|
|
|
$
|
411.8
|
|
|
$
|
152.8
|
|
Operating margin %
|
42.1
|
%
|
|
43.1
|
%
|
|
|
|
43.1
|
%
|
|
43.0
|
%
|
|
|
||||||||
Scanner
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income from operations
|
$
|
99.0
|
|
|
$
|
49.6
|
|
|
$
|
49.4
|
|
|
$
|
49.6
|
|
|
$
|
37.5
|
|
|
$
|
12.1
|
|
Operating margin %
|
36.0
|
%
|
|
30.2
|
%
|
|
|
|
30.2
|
%
|
|
30.9
|
%
|
|
|
||||||||
Total income from operations
1
|
$
|
466.6
|
|
|
$
|
353.6
|
|
|
$
|
113.0
|
|
|
$
|
353.6
|
|
|
$
|
248.9
|
|
|
$
|
104.7
|
|
Operating margin %
|
23.7
|
%
|
|
24.0
|
%
|
|
|
|
24.0
|
%
|
|
23.1
|
%
|
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Interest income
|
$
|
8.6
|
|
|
$
|
6.9
|
|
|
$
|
1.7
|
|
|
$
|
6.9
|
|
|
$
|
4.2
|
|
|
$
|
2.7
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Other income (expense), net
|
$
|
(8.5
|
)
|
|
$
|
4.2
|
|
|
$
|
(12.7
|
)
|
|
$
|
4.2
|
|
|
$
|
(10.6
|
)
|
|
$
|
14.8
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Equity in losses of investee, net of tax
|
$
|
8.7
|
|
|
$
|
3.2
|
|
|
$
|
5.5
|
|
|
$
|
3.2
|
|
|
$
|
1.7
|
|
|
$
|
1.5
|
|
|
Year Ended
|
|
|
|
Year Ended
|
|
|
||||||||||||||||
|
December 31, 2018
|
|
December 31, 2017
|
|
Change
|
|
December 31, 2017
|
|
December 31, 2016
|
|
Change
|
||||||||||||
Provision for income taxes
|
$
|
57.7
|
|
|
$
|
130.2
|
|
|
$
|
(72.5
|
)
|
|
$
|
130.2
|
|
|
$
|
51.2
|
|
|
$
|
79.0
|
|
Effective tax rates
|
12.4
|
%
|
|
35.7
|
%
|
|
|
|
35.7
|
%
|
|
21.1
|
%
|
|
|
|
Year Ended December 31,
|
||||||
|
2018
|
|
2017
|
||||
Cash and cash equivalents
|
$
|
636,899
|
|
|
$
|
449,511
|
|
Marketable securities, short-term
|
98,460
|
|
|
272,031
|
|
||
Marketable securities, long-term
|
9,112
|
|
|
39,948
|
|
||
Total
|
$
|
744,471
|
|
|
$
|
761,490
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash provided by (used in):
|
|
|
|
|
|
||||||
Operating activities
|
$
|
554,681
|
|
|
$
|
438,539
|
|
|
$
|
247,654
|
|
Investing activities
|
6,927
|
|
|
(251,477
|
)
|
|
73,028
|
|
|||
Financing activities
|
(369,434
|
)
|
|
(135,500
|
)
|
|
(95,524
|
)
|
|||
Effects of foreign exchange rate changes on cash, cash equivalents, and restricted cash
|
(4,733
|
)
|
|
5,544
|
|
|
(3,374
|
)
|
|||
Net increase
in cash, cash equivalents, and restricted cash
|
$
|
187,441
|
|
|
$
|
57,106
|
|
|
$
|
221,784
|
|
•
|
Stock-based compensation was
$70.8 million
related to equity incentive compensation granted to employees and directors;
|
•
|
Depreciation and amortization of
$54.7 million
related to our investments in property, plant and equipment and intangible assets; and
|
•
|
Net change in deferred tax assets of $15.7 million.
|
•
|
Increase of
$136.4 million
in deferred revenues corresponding to the increase in case volume;
|
•
|
Increase of $109.2 million in accounts receivable which is primarily a result of the increase in net revenues; and
|
•
|
Decrease of $36.5 million in long-term income tax payable due to timing of payments made to IRS.
|
•
|
Stock-based compensation was
$58.9 million
related to equity incentive compensation granted to employees and directors;
|
•
|
Depreciation and amortization of
$37.7 million
related to our investments in property, plant and equipment and intangible assets; and
|
•
|
Net change in deferred tax assets of
$17.6 million
.
|
•
|
Increase of
$91.0 million
in accounts receivable which is a result of the increase in net revenues;
|
•
|
Increase of
$79.7 million
in deferred revenues corresponding to the increases in case volume;
|
•
|
Increase of
$69.0 million
in long-term income tax payable due to the new TCJA enacted on December 22, 2017; and
|
•
|
Increase of
$24.2 million
in accrued and other long-term liabilities due to timing of payments and activities.
|
•
|
Stock-based compensation was
$54.1 million
related to our equity incentive compensation granted to employees and directors;
|
•
|
Depreciation and amortization of
$24.0 million
related to our investments in property, plant and equipment and intangible assets;
|
•
|
Excess tax benefits from our share-based compensation arrangements of
$16.8 million
;
|
•
|
Net change in deferred tax assets of
$16.4 million
; and
|
•
|
Net tax benefits from stock-based compensation of
$15.9 million
.
|
•
|
Increase of
$95.8 million
in accounts receivable which is a result of the increase in net revenues;
|
•
|
Increase of
$60.7 million
in deferred revenues corresponding to the increases in case volume and full year effect of our additional aligner product policy effective in July 2015; and
|
•
|
Increase of
$31.4 million
in accrued and other long-term liabilities due to timing of payments and activities.
|
◦
|
April 2016 Repurchase Program.
In 2018, we repurchased approximately $200.0 million of our common stock on the open market, completing the April 2016 Repurchase Program.
|
◦
|
May 2018 Repurchase Program.
In May 2018, we announced that our Board of Directors had authorized a plan to repurchase up to $600.0 million of our common stock. In August 2018, we repurchased $50.0 million of our common stock on the open market. In November 2018, we entered into an accelerated share repurchase ("2018 ASR") to repurchase $50.0 million of our common stock which was completed in December 2018. As of
December 31, 2018
, we have $500.0 million remaining under the May 2018 Repurchase Program
|
|
|
|
Payments Due by Period
|
||||||||||||||||
|
Total
|
|
Less than
1 Year
|
|
1-3
Years
|
|
3-5
Years
|
|
More than
5 Years
|
||||||||||
Operating lease obligations
(1)
|
$
|
106,676
|
|
|
$
|
21,429
|
|
|
$
|
39,380
|
|
|
$
|
27,496
|
|
|
$
|
18,371
|
|
Unconditional purchase obligations
|
476,904
|
|
|
166,701
|
|
|
189,523
|
|
|
120,680
|
|
|
—
|
|
|||||
Total contractual cash obligations
|
$
|
583,580
|
|
|
$
|
188,130
|
|
|
$
|
228,903
|
|
|
$
|
148,176
|
|
|
$
|
18,371
|
|
|
Three Months Ended
|
||||||||||||||||||||||||||||||
|
2018
|
|
2017
|
||||||||||||||||||||||||||||
|
December 31, 2018
|
|
September 30, 2018
|
|
June 30, 2018
|
|
March 31, 2018
|
|
December 31, 2017
|
|
September 30, 2017
|
|
June 30, 2017
|
|
March 31, 2017
|
||||||||||||||||
|
(in thousands, except per share data)
(unaudited )
|
||||||||||||||||||||||||||||||
Net revenues
|
$
|
534,020
|
|
|
$
|
505,289
|
|
|
$
|
490,259
|
|
|
$
|
436,924
|
|
|
$
|
421,323
|
|
|
$
|
385,267
|
|
|
$
|
356,482
|
|
|
$
|
310,341
|
|
Gross profit
|
383,096
|
|
|
371,781
|
|
|
365,582
|
|
|
327,408
|
|
|
317,917
|
|
|
292,488
|
|
|
270,917
|
|
|
235,625
|
|
||||||||
Income from operations
|
120,473
|
|
|
125,208
|
|
|
122,691
|
|
|
98,192
|
|
|
109,606
|
|
|
98,763
|
|
|
83,569
|
|
|
61,673
|
|
||||||||
Net income
|
97,392
|
|
|
100,872
|
|
|
106,105
|
|
|
95,866
|
|
|
10,264
|
|
|
82,555
|
|
|
69,179
|
|
|
69,420
|
|
||||||||
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
$
|
1.22
|
|
|
$
|
1.26
|
|
|
$
|
1.32
|
|
|
$
|
1.20
|
|
|
$
|
0.13
|
|
|
$
|
1.03
|
|
|
$
|
0.86
|
|
|
$
|
0.87
|
|
Diluted
|
$
|
1.20
|
|
|
$
|
1.24
|
|
|
$
|
1.30
|
|
|
$
|
1.17
|
|
|
$
|
0.13
|
|
|
$
|
1.01
|
|
|
$
|
0.85
|
|
|
$
|
0.85
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Basic
|
79,891
|
|
|
80,111
|
|
|
80,216
|
|
|
80,036
|
|
|
80,080
|
|
|
80,163
|
|
|
80,188
|
|
|
79,904
|
|
||||||||
Diluted
|
80,943
|
|
|
81,359
|
|
|
81,471
|
|
|
81,628
|
|
|
81,863
|
|
|
81,789
|
|
|
81,631
|
|
|
81,534
|
|
|
Page
|
Report of Management on Internal Control over Financial Reporting
|
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Statements of Operations for the year ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Comprehensive Income for the year ended December 31, 2018, 2017 and 2016
|
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Cash Flows for the year ended December 31, 2018, 2017 and 2016
|
|
Notes to Consolidated Financial Statements
|
•
|
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Align;
|
•
|
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of Align are being made only in accordance with authorizations of management and directors of Align; and
|
•
|
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Align's assets that could have a material effect on the financial statements.
|
|
/
S
/ JOSEPH M. HOGAN
|
Joseph M. Hogan
|
President and Chief Executive Officer
|
February 28, 2019
|
|
|
/
S
/ JOHN F. MORICI
|
John F. Morici
|
Chief Financial Officer and Senior Vice President, Global Finance
|
February 28, 2019
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenues
|
$
|
1,966,492
|
|
|
$
|
1,473,413
|
|
|
$
|
1,079,874
|
|
Cost of net revenues
|
518,625
|
|
|
356,466
|
|
|
264,580
|
|
|||
Gross profit
|
1,447,867
|
|
|
1,116,947
|
|
|
815,294
|
|
|||
Operating expenses:
|
|
|
|
|
|
||||||
Selling, general and administrative
|
852,404
|
|
|
665,777
|
|
|
490,653
|
|
|||
Research and development
|
128,899
|
|
|
97,559
|
|
|
75,720
|
|
|||
Total operating expenses
|
981,303
|
|
|
763,336
|
|
|
566,373
|
|
|||
Income from operations
|
466,564
|
|
|
353,611
|
|
|
248,921
|
|
|||
Interest income
|
8,576
|
|
|
6,948
|
|
|
4,213
|
|
|||
Other income (expense), net
|
(8,489
|
)
|
|
4,240
|
|
|
(10,568
|
)
|
|||
Net income before provision for income taxes and equity in losses of investee
|
466,651
|
|
|
364,799
|
|
|
242,566
|
|
|||
Provision for income taxes
|
57,723
|
|
|
130,162
|
|
|
51,200
|
|
|||
Equity in losses of investee, net of tax
|
8,693
|
|
|
3,219
|
|
|
1,684
|
|
|||
Net income
|
$
|
400,235
|
|
|
$
|
231,418
|
|
|
$
|
189,682
|
|
|
|
|
|
|
|
||||||
Net income per share:
|
|
|
|
|
|
||||||
Basic
|
$
|
5.00
|
|
|
$
|
2.89
|
|
|
$
|
2.38
|
|
Diluted
|
$
|
4.92
|
|
|
$
|
2.83
|
|
|
$
|
2.33
|
|
Shares used in computing net income per share:
|
|
|
|
|
|
||||||
Basic
|
80,064
|
|
|
80,085
|
|
|
79,856
|
|
|||
Diluted
|
81,357
|
|
|
81,832
|
|
|
81,484
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net income
|
$
|
400,235
|
|
|
$
|
231,418
|
|
|
$
|
189,682
|
|
Net change in foreign currency translation adjustment
|
(3,631
|
)
|
|
1,741
|
|
|
(670
|
)
|
|||
Change in unrealized gains (losses) on investments, net of tax
|
286
|
|
|
(232
|
)
|
|
712
|
|
|||
Other comprehensive income (loss)
|
(3,345
|
)
|
|
1,509
|
|
|
42
|
|
|||
Comprehensive income
|
$
|
396,890
|
|
|
$
|
232,927
|
|
|
$
|
189,724
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
636,899
|
|
|
$
|
449,511
|
|
Marketable securities, short-term
|
98,460
|
|
|
272,031
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $2,378 and $5,814, respectively
|
439,009
|
|
|
324,189
|
|
||
Inventories
|
55,641
|
|
|
31,688
|
|
||
Prepaid expenses and other current assets
|
72,470
|
|
|
80,948
|
|
||
Total current assets
|
1,302,479
|
|
|
1,158,367
|
|
||
Marketable securities, long-term
|
9,112
|
|
|
39,948
|
|
||
Property, plant and equipment, net
|
521,329
|
|
|
348,793
|
|
||
Equity method investments
|
45,913
|
|
|
54,606
|
|
||
Goodwill and intangible assets, net
|
81,949
|
|
|
89,068
|
|
||
Deferred tax assets
|
64,689
|
|
|
49,334
|
|
||
Other assets
|
26,987
|
|
|
43,893
|
|
||
Total assets
|
$
|
2,052,458
|
|
|
$
|
1,784,009
|
|
|
|
|
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
64,256
|
|
|
$
|
36,776
|
|
Accrued liabilities
|
234,679
|
|
|
195,562
|
|
||
Deferred revenues
|
393,138
|
|
|
267,713
|
|
||
Total current liabilities
|
692,073
|
|
|
500,051
|
|
||
Income tax payable
|
78,008
|
|
|
114,091
|
|
||
Other long-term liabilities
|
29,486
|
|
|
15,579
|
|
||
Total liabilities
|
799,567
|
|
|
629,721
|
|
||
Commitments and contingencies (
Notes 8 and 9
)
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Preferred stock, $0.0001 par value (5,000 shares authorized; none issued)
|
—
|
|
|
—
|
|
||
Common stock, $0.0001 par value (200,000 shares authorized; 79,778 and 80,040 issued and outstanding, respectively)
|
8
|
|
|
8
|
|
||
Additional paid-in capital
|
877,514
|
|
|
886,435
|
|
||
Accumulated other comprehensive income (loss), net
|
(2,774
|
)
|
|
571
|
|
||
Retained earnings
|
378,143
|
|
|
267,274
|
|
||
Total stockholders’ equity
|
1,252,891
|
|
|
1,154,288
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,052,458
|
|
|
$
|
1,784,009
|
|
|
Common Stock
|
|
Additional
Paid-In
Capital
|
|
Accumulated
Other
Comprehensive
Income (Loss), Net
|
|
Retained Earnings
|
|
Total
|
|||||||||||||
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balances at December 31, 2015
|
79,500
|
|
|
$
|
8
|
|
|
$
|
821,507
|
|
|
$
|
(980
|
)
|
|
$
|
27,391
|
|
|
$
|
847,926
|
|
Cumulative effect adjustment from adoption of ASU 2014-09
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,918
|
|
|
3,918
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
189,682
|
|
|
189,682
|
|
|||||
Net change in unrealized gains (losses) from investments
|
—
|
|
|
—
|
|
|
—
|
|
|
712
|
|
|
—
|
|
|
712
|
|
|||||
Net change in foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(670
|
)
|
|
—
|
|
|
(670
|
)
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
1,163
|
|
|
—
|
|
|
13,778
|
|
|
—
|
|
|
—
|
|
|
13,778
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
—
|
|
|
—
|
|
|
(29,857
|
)
|
|
—
|
|
|
—
|
|
|
(29,857
|
)
|
|||||
Common stock repurchased and retired
|
(1,110
|
)
|
|
—
|
|
|
(10,593
|
)
|
|
—
|
|
|
(85,625
|
)
|
|
(96,218
|
)
|
|||||
Net tax benefits from stock-based awards
|
—
|
|
|
—
|
|
|
15,888
|
|
|
—
|
|
|
—
|
|
|
15,888
|
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
54,148
|
|
|
—
|
|
|
—
|
|
|
54,148
|
|
|||||
Balances at December 31, 2016
|
79,553
|
|
|
8
|
|
|
864,871
|
|
|
(938
|
)
|
|
135,366
|
|
|
999,307
|
|
|||||
Cumulative effect adjustment from adoption of ASU 2016-16
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,300
|
)
|
|
(1,300
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
231,418
|
|
|
231,418
|
|
|||||
Net change in unrealized gains (losses) from investments
|
—
|
|
|
—
|
|
|
—
|
|
|
(232
|
)
|
|
—
|
|
|
(232
|
)
|
|||||
Net change in foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
1,741
|
|
|
—
|
|
|
1,741
|
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
1,073
|
|
|
—
|
|
|
14,461
|
|
|
—
|
|
|
—
|
|
|
14,461
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
—
|
|
|
—
|
|
|
(46,168
|
)
|
|
—
|
|
|
—
|
|
|
(46,168
|
)
|
|||||
Common stock repurchased and retired
|
(586
|
)
|
|
—
|
|
|
(5,583
|
)
|
|
—
|
|
|
(98,210
|
)
|
|
(103,793
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
58,854
|
|
|
—
|
|
|
—
|
|
|
58,854
|
|
|||||
Balances at December 31, 2017
|
80,040
|
|
|
8
|
|
|
886,435
|
|
|
571
|
|
|
267,274
|
|
|
1,154,288
|
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
400,235
|
|
|
400,235
|
|
|||||
Net change in unrealized gains (losses) from investments
|
—
|
|
|
—
|
|
|
—
|
|
|
286
|
|
|
—
|
|
|
286
|
|
|||||
Net change in foreign currency translation adjustment
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,631
|
)
|
|
—
|
|
|
(3,631
|
)
|
|||||
Issuance of common stock relating to employee equity compensation plans
|
795
|
|
|
—
|
|
|
16,635
|
|
|
—
|
|
|
—
|
|
|
16,635
|
|
|||||
Tax withholdings related to net share settlements of restricted stock units
|
—
|
|
|
—
|
|
|
(86,067
|
)
|
|
—
|
|
|
—
|
|
|
(86,067
|
)
|
|||||
Common stock repurchased and retired
|
(1,057
|
)
|
|
—
|
|
|
(10,252
|
)
|
|
—
|
|
|
(289,750
|
)
|
|
(300,002
|
)
|
|||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
70,763
|
|
|
—
|
|
|
—
|
|
|
70,763
|
|
|||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
384
|
|
|
384
|
|
|||||
Balances at December 31, 2018
|
79,778
|
|
|
$
|
8
|
|
|
$
|
877,514
|
|
|
$
|
(2,774
|
)
|
|
$
|
378,143
|
|
|
$
|
1,252,891
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
||||||
Net income
|
$
|
400,235
|
|
|
$
|
231,418
|
|
|
$
|
189,682
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Deferred taxes
|
(15,680
|
)
|
|
17,572
|
|
|
(16,401
|
)
|
|||
Depreciation and amortization
|
54,727
|
|
|
37,739
|
|
|
24,002
|
|
|||
Stock-based compensation
|
70,763
|
|
|
58,854
|
|
|
54,148
|
|
|||
Net tax benefits from stock-based awards
|
—
|
|
|
—
|
|
|
15,888
|
|
|||
Excess tax benefit from share-based payment arrangements
|
—
|
|
|
—
|
|
|
(16,773
|
)
|
|||
Equity in losses of investee
|
8,693
|
|
|
3,219
|
|
|
1,684
|
|
|||
Other non-cash operating activities
|
17,252
|
|
|
13,847
|
|
|
12,031
|
|
|||
Changes in assets and liabilities, net of effects of acquisitions:
|
|
|
|
|
|
||||||
Accounts receivable
|
(109,224
|
)
|
|
(90,990
|
)
|
|
(95,808
|
)
|
|||
Inventories
|
(24,109
|
)
|
|
(5,481
|
)
|
|
(7,663
|
)
|
|||
Prepaid expenses and other assets
|
(9,122
|
)
|
|
(8,669
|
)
|
|
(9,390
|
)
|
|||
Accounts payable
|
25,045
|
|
|
8,175
|
|
|
(3,395
|
)
|
|||
Accrued and other long-term liabilities
|
36,250
|
|
|
24,235
|
|
|
31,371
|
|
|||
Long-term income tax payable
|
(36,548
|
)
|
|
68,958
|
|
|
7,622
|
|
|||
Deferred revenues
|
136,399
|
|
|
79,662
|
|
|
60,656
|
|
|||
Net cash provided by operating activities
|
554,681
|
|
|
438,539
|
|
|
247,654
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||||||
Purchase of property, plant and equipment
|
(223,312
|
)
|
|
(195,695
|
)
|
|
(70,576
|
)
|
|||
Purchase of marketable securities
|
(180,191
|
)
|
|
(390,244
|
)
|
|
(405,612
|
)
|
|||
Proceeds from maturities of marketable securities
|
375,105
|
|
|
349,240
|
|
|
387,873
|
|
|||
Proceeds from sales of marketable securities
|
9,560
|
|
|
39,536
|
|
|
216,119
|
|
|||
Purchases of investments in privately held companies
|
(5,000
|
)
|
|
(12,764
|
)
|
|
(46,745
|
)
|
|||
Loan advances to equity investee
|
—
|
|
|
(36,000
|
)
|
|
—
|
|
|||
Loan repayment from equity investee
|
30,000
|
|
|
6,000
|
|
|
—
|
|
|||
Acquisition, net of cash acquired
|
—
|
|
|
(8,953
|
)
|
|
—
|
|
|||
Other investing activities
|
765
|
|
|
(2,597
|
)
|
|
(8,031
|
)
|
|||
Net cash provided by (used in) investing activities
|
6,927
|
|
|
(251,477
|
)
|
|
73,028
|
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
16,635
|
|
|
14,461
|
|
|
13,778
|
|
|||
Common stock repurchases
|
(300,002
|
)
|
|
(103,793
|
)
|
|
(96,218
|
)
|
|||
Excess tax benefit from share-based payment arrangements
|
—
|
|
|
—
|
|
|
16,773
|
|
|||
Employees’ taxes paid upon the vesting of restricted stock units
|
(86,067
|
)
|
|
(46,168
|
)
|
|
(29,857
|
)
|
|||
Net cash used in financing activities
|
(369,434
|
)
|
|
(135,500
|
)
|
|
(95,524
|
)
|
|||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
|
(4,733
|
)
|
|
5,544
|
|
|
(3,374
|
)
|
|||
Net increase in cash, cash equivalents, and restricted cash
|
187,441
|
|
|
57,106
|
|
|
221,784
|
|
|||
Cash, cash equivalents, and restricted cash at beginning of year
|
450,125
|
|
|
393,019
|
|
|
171,235
|
|
|||
Cash, cash equivalents, and restricted cash at end of year
|
$
|
637,566
|
|
|
$
|
450,125
|
|
|
$
|
393,019
|
|
|
|
December 31, 2017
|
||||||||||
|
|
As Previously Reported
|
|
Adjustment
|
|
As Adjusted
|
||||||
Asset Accounts:
|
|
|
|
|
|
|
||||||
Accounts receivable, net
|
|
$
|
322,825
|
|
|
$
|
1,364
|
|
|
$
|
324,189
|
|
Deferred tax assets
|
|
50,059
|
|
|
(725
|
)
|
|
49,334
|
|
|||
Other assets
|
|
38,379
|
|
|
5,514
|
|
|
43,893
|
|
|||
Liability and Stockholders’ Equity Accounts:
|
|
|
|
|
|
|
||||||
Accrued liabilities
|
|
$
|
194,198
|
|
|
$
|
1,364
|
|
|
$
|
195,562
|
|
Deferred revenues
|
|
266,842
|
|
|
871
|
|
|
267,713
|
|
|||
Retained earnings
|
|
263,356
|
|
|
3,918
|
|
|
267,274
|
|
|
|
December 31, 2017
|
||||||||||
|
|
As Previously Reported
|
|
Adjustment
|
|
As Adjusted
|
||||||
Cash Flows from Investing Activities
|
|
|
|
|
|
|
||||||
Other investing activities
|
|
$
|
567
|
|
|
$
|
(3,164
|
)
|
|
$
|
(2,597
|
)
|
Net cash used in investing activities
|
|
(248,313
|
)
|
|
(3,164
|
)
|
|
(251,477
|
)
|
|||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
|
|
5,510
|
|
|
34
|
|
|
5,544
|
|
|||
Net increase in cash, cash equivalents, and restricted cash
|
|
60,236
|
|
|
(3,130
|
)
|
|
57,106
|
|
|||
Cash, cash equivalents, and restricted cash at beginning of the period
|
|
389,275
|
|
|
3,744
|
|
|
393,019
|
|
|||
Cash, cash equivalents, and restricted cash at end of the period
|
|
$
|
449,511
|
|
|
$
|
614
|
|
|
$
|
450,125
|
|
|
|
December 31, 2016
|
||||||||||
|
|
As Previously Reported
|
|
Adjustment
|
|
As Adjusted
|
||||||
Cash Flows from Investing Activities
|
|
|
|
|
|
|
||||||
Other investing activities
|
|
$
|
(8,211
|
)
|
|
$
|
180
|
|
|
$
|
(8,031
|
)
|
Net cash provided by investing activities
|
|
72,848
|
|
|
180
|
|
|
73,028
|
|
|||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash
|
|
(3,417
|
)
|
|
43
|
|
|
(3,374
|
)
|
|||
Net increase in cash, cash equivalents, and restricted cash
|
|
221,561
|
|
|
223
|
|
|
221,784
|
|
|||
Cash, cash equivalents, and restricted cash at beginning of the period
|
|
167,714
|
|
|
3,521
|
|
|
171,235
|
|
|||
Cash, cash equivalents, and restricted cash at end of the period
|
|
$
|
389,275
|
|
|
$
|
3,744
|
|
|
$
|
393,019
|
|
December 31, 2018
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Commercial paper
|
|
$
|
17,793
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,793
|
|
Corporate bonds
|
|
45,100
|
|
|
—
|
|
|
(48
|
)
|
|
45,052
|
|
||||
U.S. government agency bonds
|
|
19,981
|
|
|
—
|
|
|
(77
|
)
|
|
19,904
|
|
||||
U.S. government treasury bonds
|
|
15,292
|
|
|
—
|
|
|
(1
|
)
|
|
15,291
|
|
||||
Certificates of deposit
|
|
420
|
|
|
1
|
|
|
(1
|
)
|
|
420
|
|
||||
Total marketable securities, short-term
|
|
$
|
98,586
|
|
|
$
|
1
|
|
|
$
|
(127
|
)
|
|
$
|
98,460
|
|
December 31, 2018
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Corporate bonds
|
|
$
|
4,957
|
|
|
$
|
5
|
|
|
$
|
(2
|
)
|
|
$
|
4,960
|
|
U.S. government agency bonds
|
|
1,399
|
|
|
8
|
|
|
—
|
|
|
1,407
|
|
||||
U.S. government treasury bonds
|
|
2,235
|
|
|
9
|
|
|
—
|
|
|
2,244
|
|
||||
Certificates of deposit
|
|
500
|
|
|
1
|
|
|
—
|
|
|
501
|
|
||||
Total marketable securities, long-term
|
|
$
|
9,091
|
|
|
$
|
23
|
|
|
$
|
(2
|
)
|
|
$
|
9,112
|
|
December 31, 2017
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
Commercial paper
|
|
$
|
58,503
|
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
58,502
|
|
Corporate bonds
|
|
145,728
|
|
|
3
|
|
|
(174
|
)
|
|
145,557
|
|
||||
U.S. government agency bonds
|
|
3,013
|
|
|
—
|
|
|
(7
|
)
|
|
3,006
|
|
||||
U.S. government treasury bonds
|
|
60,650
|
|
|
—
|
|
|
(70
|
)
|
|
60,580
|
|
||||
Certificates of deposit
|
|
4,386
|
|
|
—
|
|
|
—
|
|
|
4,386
|
|
||||
Total marketable securities, short-term
|
|
$
|
272,280
|
|
|
$
|
3
|
|
|
$
|
(252
|
)
|
|
$
|
272,031
|
|
December 31, 2017
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair Value
|
||||||||
U.S. government agency bonds
|
|
$
|
15,023
|
|
|
$
|
—
|
|
|
$
|
(68
|
)
|
|
$
|
14,955
|
|
Corporate bonds
|
|
25,067
|
|
|
2
|
|
|
(76
|
)
|
|
24,993
|
|
||||
Total marketable securities, long-term
|
|
$
|
40,090
|
|
|
$
|
2
|
|
|
$
|
(144
|
)
|
|
$
|
39,948
|
|
|
|
December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
One year or less
|
|
$
|
98,460
|
|
|
$
|
272,031
|
|
Due in greater than one year
|
|
9,112
|
|
|
39,948
|
|
||
Total marketable securities
|
|
$
|
107,572
|
|
|
$
|
311,979
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Equity securities under the equity method investment
1
|
$
|
45,913
|
|
|
$
|
54,606
|
|
Equity securities without readily determinable fair values
2
|
$
|
9,862
|
|
|
$
|
—
|
|
1
|
Refer to Note 4 “Equity Method Investments” of the Notes to Consolidated Financial Statements
for more information
|
2
|
In April 2018,
$4.9 million
of convertible short term notes receivable (recurring Level 3 investment) was converted into equity securities as a result of qualified financing secured by the private company in accordance with ASC 321,
“Investments—Equity Securities.”
The equity securities issued upon conversion are reported as a nonrecurring investment within other assets in our Consolidated Balance Sheet. During the year ended
December 31, 2018
, there were no fair value adjustments to equity securities without readily determinable fair values.
|
Description
|
|
Balance as of December 31, 2018
|
|
Level 1
|
|
Level 2
|
||||||
Cash equivalents:
|
|
|
|
|
|
|
||||||
Money market funds
|
|
$
|
431,081
|
|
|
$
|
431,081
|
|
|
$
|
—
|
|
Commercial paper
|
|
4,681
|
|
|
—
|
|
|
4,681
|
|
|||
U.S. government treasury bonds
|
|
2,195
|
|
|
2,195
|
|
|
—
|
|
|||
Corporate bonds
|
|
3,880
|
|
|
—
|
|
|
3,880
|
|
|||
Short-term investments:
|
|
|
|
|
|
|
||||||
Commercial paper
|
|
17,793
|
|
|
—
|
|
|
17,793
|
|
|||
Corporate bonds
|
|
45,052
|
|
|
—
|
|
|
45,052
|
|
|||
U.S. government agency bonds
|
|
19,904
|
|
|
—
|
|
|
19,904
|
|
|||
U.S. government treasury bonds
|
|
15,291
|
|
|
15,291
|
|
|
—
|
|
|||
Certificates of deposit
|
|
420
|
|
|
—
|
|
|
420
|
|
|||
Long-term investments:
|
|
|
|
|
|
|
||||||
U.S. government agency bonds
|
|
1,407
|
|
|
—
|
|
|
1,407
|
|
|||
Corporate bonds
|
|
4,960
|
|
|
—
|
|
|
4,960
|
|
|||
U.S. government treasury bonds
|
|
2,244
|
|
|
2,244
|
|
|
—
|
|
|||
Certificate of deposit
|
|
501
|
|
|
—
|
|
|
501
|
|
|||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
||||||
Israeli funds
|
|
3,047
|
|
|
—
|
|
|
3,047
|
|
|||
|
|
$
|
552,456
|
|
|
$
|
450,811
|
|
|
$
|
101,645
|
|
Description
|
|
Balance as of December 31, 2017
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
||||||||
Cash equivalents:
|
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
|
$
|
253,155
|
|
|
$
|
253,155
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial paper
|
|
7,246
|
|
|
—
|
|
|
7,246
|
|
|
—
|
|
||||
Corporate bonds
|
|
2,016
|
|
|
—
|
|
|
2,016
|
|
|
—
|
|
||||
Short-term investments:
|
|
|
|
|
|
|
|
|
||||||||
Commercial paper
|
|
58,502
|
|
|
—
|
|
|
58,502
|
|
|
—
|
|
||||
Corporate bonds
|
|
145,557
|
|
|
—
|
|
|
145,557
|
|
|
—
|
|
||||
U.S. government agency bonds
|
|
3,006
|
|
|
—
|
|
|
3,006
|
|
|
—
|
|
||||
U.S. government treasury bonds
|
|
60,580
|
|
|
60,580
|
|
|
—
|
|
|
—
|
|
||||
Certificates of deposit
|
|
4,386
|
|
|
—
|
|
|
4,386
|
|
|
—
|
|
||||
Long-term investments:
|
|
|
|
|
|
|
|
|
||||||||
U.S. government agency bonds
|
|
14,955
|
|
|
—
|
|
|
14,955
|
|
|
—
|
|
||||
Corporate bonds
|
|
24,993
|
|
|
—
|
|
|
24,993
|
|
|
—
|
|
||||
Prepaid expenses and other current assets:
|
|
|
|
|
|
|
|
|
||||||||
Israeli funds
|
|
3,075
|
|
|
—
|
|
|
3,075
|
|
|
—
|
|
||||
Short-term notes receivable
|
|
4,476
|
|
|
—
|
|
|
—
|
|
|
4,476
|
|
||||
|
|
$
|
581,947
|
|
|
$
|
313,735
|
|
|
$
|
263,736
|
|
|
$
|
4,476
|
|
|
December 31, 2018
|
||||
|
Local Currency Amount
|
|
Notional Contract Amount (USD)
|
||
Euro
|
€62,000
|
|
$
|
71,095
|
|
Chinese Yuan
|
¥375,000
|
|
54,515
|
|
|
Brazilian Real
|
R$81,000
|
|
20,858
|
|
|
Canadian Dollar
|
C$27,000
|
|
19,808
|
|
|
British Pound
|
£13,000
|
|
16,635
|
|
|
Japanese Yen
|
¥1,700,000
|
|
15,357
|
|
|
Australian Dollar
|
A$3,000
|
|
2,114
|
|
|
|
|
|
$
|
200,382
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Raw materials
|
$
|
26,119
|
|
|
$
|
12,721
|
|
Work in process
|
13,784
|
|
|
12,157
|
|
||
Finished goods
|
15,738
|
|
|
6,810
|
|
||
Total inventories
|
$
|
55,641
|
|
|
$
|
31,688
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Capitalized commissions
1
|
$
|
9,185
|
|
|
$
|
5,514
|
|
Equity securities
|
9,862
|
|
|
—
|
|
||
Security deposits
|
5,162
|
|
|
3,557
|
|
||
Loan receivable from equity investee
|
—
|
|
|
30,000
|
|
||
Other long-term assets
|
2,778
|
|
|
4,822
|
|
||
Total other assets
|
$
|
26,987
|
|
|
$
|
43,893
|
|
|
|
|
December 31,
|
||||||
|
Generally Used Estimated Useful Life
|
|
2018
|
|
2017
|
||||
Clinical and manufacturing equipment
|
Up to 10 years
|
|
$
|
236,179
|
|
|
$
|
183,392
|
|
Computer hardware
|
3 years
|
|
34,297
|
|
|
24,933
|
|
||
Computer software
|
3 years
|
|
59,617
|
|
|
54,756
|
|
||
Furniture and fixtures
|
5 years
|
|
33,436
|
|
|
16,271
|
|
||
Leasehold improvements
|
Lease term
(1)
|
|
77,168
|
|
|
37,756
|
|
||
Building
|
20 years
|
|
139,315
|
|
|
63,887
|
|
||
Land
|
—
|
|
17,630
|
|
|
17,630
|
|
||
CIP
|
—
|
|
95,414
|
|
|
85,976
|
|
||
Total
|
|
|
693,056
|
|
|
484,601
|
|
||
Less: Accumulated depreciation and amortization and impairment charges
|
|
|
(171,727
|
)
|
|
(135,808
|
)
|
||
Total property, plant and equipment, net
|
|
|
$
|
521,329
|
|
|
$
|
348,793
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Accrued payroll and benefits
|
$
|
127,109
|
|
|
$
|
103,004
|
|
Accrued expenses
|
39,323
|
|
|
27,318
|
|
||
Accrued customer credits and deposits
|
12,439
|
|
|
5,373
|
|
||
Accrued warranty
|
8,551
|
|
|
5,929
|
|
||
Accrued property, plant and equipment
|
8,193
|
|
|
11,362
|
|
||
Accrued professional fees
|
6,752
|
|
|
6,316
|
|
||
Accrued sales return reserve
1
|
6,534
|
|
|
1,364
|
|
||
Accrued sales tax and value added tax
|
6,276
|
|
|
5,503
|
|
||
Accrued income taxes
|
5,752
|
|
|
12,405
|
|
||
Accrued sales rebate
|
5,668
|
|
|
11,209
|
|
||
Other accrued liabilities
|
8,082
|
|
|
5,779
|
|
||
Total accrued liabilities
|
$
|
234,679
|
|
|
$
|
195,562
|
|
Accrued warranty as of December 31, 2016
|
$
|
3,841
|
|
Charged to cost of net revenues
|
7,195
|
|
|
Actual warranty expenditures
|
(5,107
|
)
|
|
Accrued warranty as of December 31, 2017
|
5,929
|
|
|
Charged to cost of net revenues
|
15,059
|
|
|
Actual warranty expenditures
|
(12,437
|
)
|
|
Accrued warranty as of December 31, 2018
|
$
|
8,551
|
|
|
December 31,
|
||||||
|
2018
|
|
2017
|
||||
Deferred revenues - current
|
$
|
393,138
|
|
|
$
|
267,713
|
|
Deferred revenues - long-term
1
|
17,051
|
|
|
4,588
|
|
|
Total
|
||
Balance as of December 31, 2016
|
$
|
61,044
|
|
Goodwill from distributor acquisitions
|
3,247
|
|
|
Adjustments
(1)
|
323
|
|
|
Balance as of December 31, 2017
|
64,614
|
|
|
Adjustments
(1)
|
(585
|
)
|
|
Balance as of December 31, 2018
|
$
|
64,029
|
|
|
Weighted Average Amortization Period (in years)
|
|
Gross Carrying Amount as of
December 31, 2018
|
|
Accumulated
Amortization
|
|
Accumulated Impairment Loss
|
|
Net Carrying
Value as of
December 31, 2018
|
||||||||
Trademarks
|
15
|
|
$
|
7,100
|
|
|
$
|
(1,907
|
)
|
|
$
|
(4,179
|
)
|
|
$
|
1,014
|
|
Existing technology
|
13
|
|
12,600
|
|
|
(5,268
|
)
|
|
(4,328
|
)
|
|
3,004
|
|
||||
Customer relationships
|
11
|
|
33,500
|
|
|
(16,542
|
)
|
|
(10,751
|
)
|
|
6,207
|
|
||||
Reacquired rights
|
3
|
|
7,500
|
|
|
(4,341
|
)
|
|
—
|
|
|
3,159
|
|
||||
Patents
|
8
|
|
6,796
|
|
|
(2,334
|
)
|
|
—
|
|
|
4,462
|
|
||||
Other
|
2
|
|
618
|
|
|
(544
|
)
|
|
—
|
|
|
74
|
|
||||
Total intangible assets
|
|
|
$
|
68,114
|
|
|
$
|
(30,936
|
)
|
|
$
|
(19,258
|
)
|
|
$
|
17,920
|
|
|
Weighted Average Amortization Period (in years)
|
|
Gross Carrying
Amount as of
December 31, 2017
|
|
Accumulated
Amortization
|
|
Accumulated Impairment Loss
|
|
Net Carrying
Value as of
December 31, 2017
|
||||||||
Trademarks
|
15
|
|
$
|
7,100
|
|
|
$
|
(1,769
|
)
|
|
$
|
(4,179
|
)
|
|
$
|
1,152
|
|
Existing technology
|
13
|
|
12,600
|
|
|
(4,704
|
)
|
|
(4,328
|
)
|
|
3,568
|
|
||||
Customer relationships
|
11
|
|
33,500
|
|
|
(14,681
|
)
|
|
(10,751
|
)
|
|
8,068
|
|
||||
Reacquired rights
|
3
|
|
7,500
|
|
|
(1,356
|
)
|
|
—
|
|
|
6,144
|
|
||||
Patents
|
8
|
|
6,798
|
|
|
(1,504
|
)
|
|
—
|
|
|
5,294
|
|
||||
Other
|
2
|
|
618
|
|
|
(390
|
)
|
|
—
|
|
|
228
|
|
||||
Total intangible assets
|
|
|
$
|
68,116
|
|
|
$
|
(24,404
|
)
|
|
$
|
(19,258
|
)
|
|
$
|
24,454
|
|
Fiscal Year
|
|
Amortization
|
||
2019
|
|
$
|
6,134
|
|
2020
|
|
3,847
|
|
|
2021
|
|
3,389
|
|
|
2022
|
|
2,116
|
|
|
2023
|
|
1,495
|
|
|
Thereafter
|
|
939
|
|
|
Total
|
|
$
|
17,920
|
|
Fiscal Year
|
Operating Leases
|
||
2019
|
$
|
21,429
|
|
2020
|
20,483
|
|
|
2021
|
18,897
|
|
|
2022
|
15,096
|
|
|
2023
|
12,400
|
|
|
Thereafter
|
18,371
|
|
|
Total minimum lease payments
|
$
|
106,676
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Cost of net revenues
|
$
|
3,695
|
|
|
$
|
3,330
|
|
|
$
|
3,966
|
|
Selling, general and administrative
|
56,422
|
|
|
46,550
|
|
|
42,612
|
|
|||
Research and development
|
10,646
|
|
|
8,974
|
|
|
7,570
|
|
|||
Total stock-based compensation
|
$
|
70,763
|
|
|
$
|
58,854
|
|
|
$
|
54,148
|
|
|
Number of
Shares
Underlying
Stock Options
(in thousands)
|
|
Weighted
Average
Exercise
Price per Share
|
|
Weighted Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
|||||
Outstanding as of December 31, 2017
|
75
|
|
|
$
|
11.36
|
|
|
|
|
|
||
Exercised
|
(67
|
)
|
|
11.76
|
|
|
|
|
|
|||
Cancelled or expired
|
—
|
|
|
—
|
|
|
|
|
|
|||
Outstanding as of December 31, 2018
|
8
|
|
|
$
|
8.07
|
|
|
0.16
|
|
$
|
1,649
|
|
Vested at December 31, 2018
|
8
|
|
|
$
|
8.07
|
|
|
0.16
|
|
$
|
1,649
|
|
Exercisable at December 31, 2018
|
8
|
|
|
$
|
8.07
|
|
|
0.16
|
|
$
|
1,649
|
|
|
Number of Shares
Underlying RSUs
(in thousands)
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||
Nonvested as of December 31, 2017
|
1,341
|
|
|
$
|
82.30
|
|
|
|
|
|
||
Granted
|
235
|
|
|
262.58
|
|
|
|
|
|
|||
Vested and released
|
(562
|
)
|
|
75.22
|
|
|
|
|
|
|||
Forfeited
|
(83
|
)
|
|
112.33
|
|
|
|
|
|
|||
Nonvested as of December 31, 2018
|
931
|
|
|
$
|
129.42
|
|
|
1.04
|
|
$
|
194,950
|
|
|
Number of Shares
Underlying MSUs
(in thousands)
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average
Remaining
Contractual Term
(in years)
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|||||
Nonvested as of December 31, 2017
|
428
|
|
|
$
|
78.53
|
|
|
|
|
|
|
|
Granted
|
208
|
|
|
266.78
|
|
|
|
|
|
|||
Vested and released
|
(312
|
)
|
|
62.41
|
|
|
|
|
|
|||
Forfeited
|
—
|
|
|
—
|
|
|
|
|
|
|||
Nonvested as of December 31, 2018
|
324
|
|
|
$
|
215.07
|
|
|
1.16
|
|
$
|
67,897
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Expected term (in years)
|
3.0
|
|
|
3.0
|
|
|
3.0
|
|
|||
Expected volatility
|
31.9
|
%
|
|
28.9
|
%
|
|
34.0
|
%
|
|||
Risk-free interest rate
|
2.5
|
%
|
|
1.5
|
%
|
|
0.9
|
%
|
|||
Expected dividends
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average fair value per share at grant date
|
$
|
470.75
|
|
|
$
|
120.39
|
|
|
$
|
68.88
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Number of shares issued (in thousands)
|
164
|
|
|
202
|
|
|
197
|
|
|||
Weighted average price
|
$
|
96.95
|
|
|
$
|
59.93
|
|
|
$
|
48.65
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Expected term (in years)
|
1.3
|
|
|
1.2
|
|
|
1.2
|
|
|||
Expected volatility
|
35.2
|
%
|
|
26.8
|
%
|
|
30.5
|
%
|
|||
Risk-free interest rate
|
2.2
|
%
|
|
1.0
|
%
|
|
0.7
|
%
|
|||
Expected dividends
|
—
|
|
|
—
|
|
|
—
|
|
|||
Weighted average fair value at grant date
|
$
|
94.71
|
|
|
$
|
31.36
|
|
|
$
|
22.23
|
|
|
Year ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Domestic
|
$
|
171,658
|
|
|
$
|
123,696
|
|
|
$
|
118,871
|
|
Foreign
|
294,993
|
|
|
241,103
|
|
|
123,695
|
|
|||
Net income before provision for income taxes and equity in losses of investee
|
$
|
466,651
|
|
|
$
|
364,799
|
|
|
$
|
242,566
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Federal
|
|
|
|
|
|
||||||
Current
|
$
|
35,788
|
|
|
$
|
91,214
|
|
|
$
|
40,235
|
|
Deferred
|
(5,989
|
)
|
|
15,724
|
|
|
24,794
|
|
|||
|
29,799
|
|
|
106,938
|
|
|
65,029
|
|
|||
State
|
|
|
|
|
|
||||||
Current
|
9,568
|
|
|
2,580
|
|
|
2,603
|
|
|||
Deferred
|
(3,274
|
)
|
|
2,677
|
|
|
2,636
|
|
|||
|
6,294
|
|
|
5,257
|
|
|
5,239
|
|
|||
Foreign
|
|
|
|
|
|
||||||
Current
|
22,753
|
|
|
15,285
|
|
|
8,964
|
|
|||
Deferred
|
(1,123
|
)
|
|
2,682
|
|
|
(28,032
|
)
|
|||
|
21,630
|
|
|
17,967
|
|
|
(19,068
|
)
|
|||
Provision for income taxes
|
$
|
57,723
|
|
|
$
|
130,162
|
|
|
$
|
51,200
|
|
|
Year Ended December 31,
|
|||||||
|
2018
|
|
2017
|
|
2016
|
|||
U.S. federal statutory income tax rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
State income taxes, net of federal tax benefit
|
1.3
|
|
|
1.4
|
|
|
2.1
|
|
U.S. tax on foreign earnings
|
4.1
|
|
|
1.5
|
|
|
0.2
|
|
Impact of U.S. Tax Cuts and Jobs Act (“TCJA”)
|
2.1
|
|
|
23.1
|
|
|
—
|
|
Impact of differences in foreign tax rates
|
(6.7
|
)
|
|
(18.0
|
)
|
|
(6.3
|
)
|
Impact of expiration of statute of limitations
|
(6.2
|
)
|
|
—
|
|
|
—
|
|
Stock-based compensation
|
(3.4
|
)
|
|
(6.3
|
)
|
|
1.2
|
|
Other items not individually material
|
0.2
|
|
|
(1.0
|
)
|
|
1.8
|
|
Valuation allowance release for Israel
|
—
|
|
|
—
|
|
|
(12.9
|
)
|
|
12.4
|
%
|
|
35.7
|
%
|
|
21.1
|
%
|
|
|
Year Ended December 31,
|
||||||
|
|
2018
|
|
2017
|
||||
Deferred tax assets:
|
|
|
|
|
||||
Net operating loss and capital loss carryforwards
|
|
$
|
25,410
|
|
|
$
|
24,971
|
|
Reserves and accruals
|
|
24,769
|
|
|
12,547
|
|
||
Stock-based compensation
|
|
8,571
|
|
|
10,074
|
|
||
Deferred revenue
|
|
14,285
|
|
|
10,811
|
|
||
Net translation losses
|
|
1,158
|
|
|
1,928
|
|
||
Credit carryforwards
|
|
115
|
|
|
792
|
|
||
|
|
74,308
|
|
|
61,123
|
|
||
Deferred tax liabilities:
|
|
|
|
|
||||
Depreciation and amortization
|
|
8,320
|
|
|
7,522
|
|
||
Prepaid expenses
|
|
902
|
|
|
751
|
|
||
Unremitted foreign earnings
|
|
612
|
|
|
3,305
|
|
||
|
|
9,834
|
|
|
11,578
|
|
||
Net deferred tax assets before valuation allowance
|
|
64,474
|
|
|
49,545
|
|
||
Valuation allowance
|
|
(251
|
)
|
|
(278
|
)
|
||
Net deferred tax assets
|
|
$
|
64,223
|
|
|
$
|
49,267
|
|
Unrecognized tax benefit as of December 31, 2015
|
$
|
39,413
|
|
Tax positions related to current year:
|
|
||
Additions for uncertain tax positions
|
6,971
|
|
|
Unrecognized tax benefit as of December 31, 2016
|
46,384
|
|
|
Tax positions related to current year:
|
|
||
Additions for uncertain tax positions
|
1,819
|
|
|
Tax positions related to prior year:
|
|
||
Additions for uncertain tax positions
|
1,809
|
|
|
Decreases for uncertain tax positions
|
(826
|
)
|
|
Settlements with tax authorities
|
(1,527
|
)
|
|
Reductions due to lapse of applicable statute of limitations
|
(3
|
)
|
|
Unrecognized tax benefit as of December 31, 2017
|
47,656
|
|
|
Tax positions related to current year:
|
|
||
Additions for uncertain tax positions
|
14,519
|
|
|
Tax positions related to prior year:
|
|
||
Additions for uncertain tax positions
|
80
|
|
|
Reductions due to lapse of applicable statute of limitations
|
(28,993
|
)
|
|
Unrecognized tax benefit as of December 31, 2018
|
$
|
33,262
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator:
|
|
|
|
|
|
||||||
Net income
|
$
|
400,235
|
|
|
$
|
231,418
|
|
|
$
|
189,682
|
|
Denominator:
|
|
|
|
|
|
||||||
Weighted average common shares outstanding, basic
|
80,064
|
|
|
80,085
|
|
|
79,856
|
|
|||
Dilutive effect of potential common stock
|
1,293
|
|
|
1,747
|
|
|
1,628
|
|
|||
Total shares, diluted
|
81,357
|
|
|
81,832
|
|
|
81,484
|
|
|||
Net income per share, basic
|
$
|
5.00
|
|
|
$
|
2.89
|
|
|
$
|
2.38
|
|
Net income per share, diluted
|
$
|
4.92
|
|
|
$
|
2.83
|
|
|
$
|
2.33
|
|
|
Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Taxes paid
|
$
|
114,601
|
|
|
$
|
51,231
|
|
|
$
|
47,289
|
|
Non-cash investing activities:
|
|
|
|
|
|
||||||
Fixed assets acquired with accounts payable or accrued liabilities
|
$
|
15,069
|
|
|
$
|
15,105
|
|
|
$
|
4,434
|
|
Conversion of convertible notes receivable into equity securities
|
$
|
4,862
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Fair value of option to purchase property
|
$
|
—
|
|
|
$
|
3,936
|
|
|
$
|
—
|
|
•
|
Our Clear Aligner segment consists of Comprehensive Products, Non-Comprehensive Products and Non-Case revenues as defined below:
|
•
|
Comprehensive Products include, but not limited to, our Invisalign Comprehensive (formerly known as Invisalign Full and Invisalign Teen), Invisalign Assist and Invisalign First.
|
•
|
Non-Comprehensive Products include, Invisalign Express 10, Invisalign Express 5, Express Package, Lite Package and Invisalign Go products in addition to revenues from the sale of aligners to SDC under our supply agreement.
|
•
|
Non-Case includes, but not limited to, Vivera retainers along with our training and ancillary products for treating malocclusion.
|
•
|
Our Scanner segment consists of intraoral scanning systems, additional services and ancillary products available with the intraoral scanners that provide digital alternatives to the traditional cast models. This segment includes our iTero scanner and OrthoCAD services.
|
|
For the Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenues
|
|
|
|
|
|
||||||
Clear Aligner
|
$
|
1,691,467
|
|
|
$
|
1,309,262
|
|
|
$
|
958,327
|
|
Scanner
|
275,025
|
|
|
164,151
|
|
|
121,547
|
|
|||
Total net revenues
|
$
|
1,966,492
|
|
|
$
|
1,473,413
|
|
|
$
|
1,079,874
|
|
Gross profit
|
|
|
|
|
|
||||||
Clear Aligner
|
$
|
1,280,495
|
|
|
$
|
1,019,563
|
|
|
$
|
747,494
|
|
Scanner
|
167,372
|
|
|
97,384
|
|
|
67,800
|
|
|||
Total gross profit
|
$
|
1,447,867
|
|
|
$
|
1,116,947
|
|
|
$
|
815,294
|
|
Income from operations
|
|
|
|
|
|
||||||
Clear Aligner
|
$
|
712,439
|
|
|
$
|
564,648
|
|
|
$
|
411,817
|
|
Scanner
|
98,998
|
|
|
49,613
|
|
|
37,498
|
|
|||
Unallocated corporate expenses
|
(344,873
|
)
|
|
(260,650
|
)
|
|
(200,394
|
)
|
|||
Total income from operations
|
$
|
466,564
|
|
|
$
|
353,611
|
|
|
$
|
248,921
|
|
Depreciation and amortization
|
|
|
|
|
|
||||||
Clear Aligner
|
$
|
29,001
|
|
|
$
|
21,581
|
|
|
$
|
13,742
|
|
Scanner
|
4,965
|
|
|
4,385
|
|
|
3,871
|
|
|||
Unallocated corporate expenses
|
20,761
|
|
|
11,773
|
|
|
6,389
|
|
|||
Total depreciation and amortization
|
$
|
54,727
|
|
|
$
|
37,739
|
|
|
$
|
24,002
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Total segment income from operations
|
$
|
811,437
|
|
|
$
|
614,261
|
|
|
$
|
449,315
|
|
Unallocated corporate expenses
|
(344,873
|
)
|
|
(260,650
|
)
|
|
(200,394
|
)
|
|||
Total income from operations
|
466,564
|
|
|
353,611
|
|
|
248,921
|
|
|||
Interest income
|
8,576
|
|
|
6,948
|
|
|
4,213
|
|
|||
Other income (expense), net
|
(8,489
|
)
|
|
4,240
|
|
|
(10,568
|
)
|
|||
Net income before provision for income taxes and equity in losses of investee
|
$
|
466,651
|
|
|
$
|
364,799
|
|
|
$
|
242,566
|
|
|
For the Year Ended December 31,
|
||||||||||
|
2018
|
|
2017
|
|
2016
|
||||||
Net revenues
(1)
:
|
|
|
|
|
|
||||||
United States
(2)
|
$
|
1,023,559
|
|
|
$
|
836,200
|
|
|
$
|
692,254
|
|
The Netherlands
(2)
|
610,039
|
|
|
456,108
|
|
|
286,911
|
|
|||
China
|
155,790
|
|
|
81,661
|
|
|
46,480
|
|
|||
Other International
|
177,104
|
|
|
99,444
|
|
|
54,229
|
|
|||
Total net revenues
|
$
|
1,966,492
|
|
|
$
|
1,473,413
|
|
|
$
|
1,079,874
|
|
(1)
|
Net revenues are attributed to countries based on location of where revenue is recognized.
|
|
As of December 31,
|
||||||
|
2018
|
|
2017
|
||||
Long-lived assets
(3)
:
|
|
|
|
||||
The Netherlands
|
$
|
206,679
|
|
|
$
|
143,673
|
|
United States
|
139,239
|
|
|
128,171
|
|
||
Costa Rica
|
80,218
|
|
|
30,738
|
|
||
China
|
36,249
|
|
|
5,480
|
|
||
Mexico
|
33,240
|
|
|
25,090
|
|
||
Other International
|
25,704
|
|
|
15,641
|
|
||
Total long-lived assets
|
$
|
521,329
|
|
|
$
|
348,793
|
|
Plan Category
|
|
Number of securities
to be issued upon exercise
of outstanding options
and restricted stock
units(a)
|
|
Weighted average
exercise price of
outstanding
options(b)
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
(excluding securities
reflected in column(a))
|
|
||||
Equity compensation plans approved by security holders
|
|
1,263,246
|
|
1
|
$
|
8.07
|
|
|
6,632,043
|
|
2, 3
|
Equity compensation plans not approved by security holders
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Total
|
|
1,263,246
|
|
|
$
|
8.07
|
|
|
6,632,043
|
|
|
1
|
Includes 930,859 restricted stock units and 324,200 market-performance based restricted stock units at target, which have an exercise price of zero.
|
2
|
Includes 571,778 shares available for issuance under our ESPP. We are unable to ascertain with specificity the number of securities to be issued upon exercise of outstanding rights or the weighted average exercise price of outstanding rights under the ESPP.
|
3
|
Includes 648,185 of potentially issuable MSUs if performance targets are achieved at maximum payout.
|
(a)
|
Financial Statements
|
1.
|
Consolidated financial statements
|
Report of Independent Registered Public Accounting Firm
|
|
Consolidated Statements of Operations for the year ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Comprehensive Income for the year ended December 31, 2018, 2017 and 2016
|
|
Consolidated Balance Sheets as of December 31, 2018 and 2017
|
|
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2018, 2017 and 2016
|
|
Consolidated Statements of Cash Flows for the year ended December 31, 2018, 2017 and 2016
|
|
Notes to Consolidated Financial Statements
|
2.
|
The following financial statement schedule is filed as part of this Annual Report on Form 10-K:
|
|
Balance at
Beginning
of Period
|
|
Additions
(Reductions)
to Costs
and
Expenses
|
|
Write
Offs
|
|
Balance at
End of Period
|
||||||||
|
(in thousands)
|
||||||||||||||
Allowance for doubtful accounts
(1)
:
|
|
|
|
|
|
|
|
||||||||
Year Ended December 31, 2016
|
$
|
1,108
|
|
|
$
|
8,585
|
|
|
$
|
(6,747
|
)
|
|
$
|
2,946
|
|
Year Ended December 31, 2017
|
$
|
2,946
|
|
|
$
|
9,948
|
|
|
$
|
(7,080
|
)
|
|
$
|
5,814
|
|
Year Ended December 31, 2018
|
$
|
5,814
|
|
|
$
|
12,321
|
|
|
$
|
(15,757
|
)
|
|
$
|
2,378
|
|
Valuation allowance for deferred tax assets:
|
|
|
|
|
|
|
|
||||||||
Year Ended December 31, 2016
|
$
|
31,685
|
|
|
$
|
(31,429
|
)
|
|
$
|
—
|
|
|
$
|
256
|
|
Year Ended December 31, 2017
|
$
|
256
|
|
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
278
|
|
Year Ended December 31, 2018
|
$
|
278
|
|
|
$
|
(27
|
)
|
|
$
|
—
|
|
|
$
|
251
|
|
(1)
|
Balances have been recast to reflect the adoption of new revenue accounting standard (
Refer to Note 1 "Summary of Significant Accounting Policies" of the Notes to Consolidated Financial Statements
for details).
|
(b)
|
The following Exhibits are included in this Annual Report on Form 10-K:
|
Exhibit
Number |
Description
|
Form
|
Date
|
Exhibit
Number Incorporated by Reference herein |
|
Filed
herewith |
Form S-1, as amended (File No. 333-49932)
|
12/28/2000
|
3.1
|
|
|
||
Form 8-K
|
2/29/2012
|
3.2
|
|
|
||
Form S-1, as amended (File No. 333-49932)
|
1/17/2001
|
4.1
|
|
|
||
Form 10-K
|
2/28/2017
|
10.1
|
|
|
||
Form 10-K
|
2/28/2017
|
10.2
|
|
|
||
Form 10-K
|
2/28/2017
|
10.2A
|
|
|
||
Form 8-K
|
5/25/2010
|
10.2
|
|
|
||
Form S-1 as amended (File No. 333-49932)
|
1/17/2001
|
10.15
|
|
|
||
Form 10-Q
|
11/5/2007
|
10.1C
|
|
|
||
Form 10-Q
|
8/4/2005
|
10.4
|
|
|
||
Form 10-Q
|
5/8/2008
|
10.3
|
|
|
||
Form 10-K
|
2/28/2017
|
10.8
|
|
|
||
Form 8-K
|
2/5/2019
|
|
|
|
||
|
|
10.1
|
|
*
|
||
|
|
10.2
|
|
*
|
||
|
|
10.3
|
|
*
|
||
Form 8-K
|
6/25/2018
|
10.1
|
|
|
||
Form 10-Q
|
5/1/2015
|
10.3
|
|
|
||
Form 10-Q
|
7/30/2015
|
10.31
|
|
|
||
Form 10-Q
|
11/8/2016
|
10.2
|
|
|
||
Form 8-K
|
12/23/2016
|
10.1
|
|
|
||
Form 8-K
|
7/28/2016
|
10.1
|
|
|
Exhibit
Number |
Description
|
Form
|
Date
|
Exhibit
Number Incorporated by Reference herein |
|
Filed
herewith |
Form 8-K
|
7/27/2017
|
10.1
|
|
|
||
Form 8-K
|
7/27/2017
|
10.2
|
|
|
||
Form 8-K
|
11/20/2017
|
10.1
|
|
|
||
Form 8-K
|
2/27/2018
|
10.1
|
|
|
||
|
|
10.4
|
|
*
|
||
|
|
10.5
|
|
*
|
||
|
|
10.6
|
|
*
|
||
|
|
|
|
*
|
||
|
|
|
|
*
|
||
|
|
|
|
*
|
||
|
|
|
|
*
|
||
|
|
|
|
*
|
||
101.INS
|
XBRL Instance Document
|
|
|
|
|
*
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
*
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
*
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
*
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
*
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
*
|
†
|
Management contract or compensatory plan or arrangement filed as an Exhibit to this form pursuant to Items 14(a) and 14(c) of Form 10-K.
|
††
|
Portions of the exhibit have been omitted pursuant to a request for confidential treatment. The confidential portions have been filed with the SEC.
|
ALIGN TECHNOLOGY, INC.
|
|
|
|
By:
|
/
S
/ JOSEPH M. HOGAN
|
|
Joseph M. Hogan
|
|
President and Chief Executive Officer
|
Signature
|
|
Title
|
|
Date
|
|
|
|
||
/S/ JOSEPH M. HOGAN
|
|
President and Chief Executive Officer (Principal Executive Officer)
|
|
February 28, 2019
|
Joseph M. Hogan
|
|
|
||
|
|
|
|
|
/S/ JOHN F. MORICI
|
|
Chief Financial Officer and Senior Vice President, Global Finance (Principal Financial Officer and Principal Accounting Officer)
|
|
February 28, 2019
|
John F. Morici
|
|
|
||
|
|
|
|
|
/S/ JOSEPH LACOB
|
|
Director
|
|
February 28, 2019
|
Joseph Lacob
|
|
|
||
|
|
|
|
|
/S/ C. RAYMOND LARKIN, JR.
|
|
Director
|
|
February 28, 2019
|
C. Raymond Larkin, Jr.
|
|
|
||
|
|
|
|
|
/S/ GEORGE J. MORROW
|
|
Director
|
|
February 28, 2019
|
George J. Morrow
|
|
|
||
|
|
|
|
|
|
|
|
|
|
/S/ ANDREA L. SAIA
|
|
Director
|
|
February 28, 2019
|
Andrea L. Saia
|
|
|
||
|
|
|
|
|
/S/ GREG J. SANTORA
|
|
Director
|
|
February 28, 2019
|
Greg J. Santora
|
|
|
||
|
|
|
|
|
/S/ THOMAS M. PRESCOTT
|
|
Director
|
|
February 28, 2019
|
Thomas M. Prescott
|
|
|
||
|
|
|
|
|
/S/ WARREN S. THALER
|
|
Director
|
|
February 28, 2019
|
Warren S. Thaler
|
|
|
||
|
|
|
|
|
/S/ SUSAN E. SIEGEL
|
|
Director
|
|
February 28, 2019
|
Susan E. Siegel
|
|
|
/S/ KEVIN J. DALLAS
|
|
Director
|
|
February 28, 2019
|
Kevin J. Dallas
|
|
|
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